Price Increases Support Record Sales Growth and Profitability for Saint-Gobain; Shares Fairly Valued

No-moat Saint-Gobain’s full-year results broadly met our expectations in what can be described as a transformational year for the group, which saw 37 acquisitions completed. Price increases to the tune of 6.7% more than offset inflationary cost pressures, which combined with fixed-cost savings and portfolio management helped Saint-Gobain deliver double-digit EBIT margins for the first time in its history. Organic revenue grew 18.4% for the full year and exceeded 2019 levels by 13.8%, with higher volumes being driven by renovation activities in Europe and a robust residential market in North America. However, group volumes in the second half grew by a modest 0.6% against a tougher comparative. We believe 2022 will be more challenging for the group as raw material and energy inflation is likely to persist (despite energy hedging strategies), which will require even further price hikes to maintain current profitability and consumers becoming more stretched. We don’t anticipate materially changing our EUR 54 fair value estimate.