SGL Carbon

SiC And Carbon Fiber Restructuring Will Secure A Bright Future

AnalystConsensusTarget

Not Invested

Based on Analyst Price Targets

Published

18 Jan 25

Updated

11 Dec 25

n/a

AnalystConsensusTarget's Fair Value

n/a

-28.6%

0.2%

-28.6%

0.2%

You can edit this narrative until Dec 12 8:05 PM. Then, changes will post as Updates.

Author's Valuation

€3.3311.3% undervalued

AnalystConsensusTarget Fair Value

Narrative

Updates12

Last Update 11 Dec 25

SGL: Future Upside Expected As Hold Rating Persists After Price Cut

Analysts have trimmed their price target on SGL Carbon by EUR 0.45, citing a slightly lower long term valuation framework while maintaining a broadly unchanged view on near term fundamentals.

Analyst Commentary

Bullish Takeaways

Bullish analysts view the reaffirmed Hold stance as evidence that near term execution and earnings visibility remain broadly intact despite the reduced price target.
The modest trim in valuation is seen as a calibration of long term growth expectations rather than a signal of structural deterioration in the business model.
Maintaining coverage with a neutral recommendation suggests that, at current levels, the risk reward profile is still balanced and could improve if management delivers on cost and margin initiatives.
Some investors may interpret the lower target as clearing a higher bar set previously, potentially making future upside surprises more meaningful to the equity story.

Bearish Takeaways

Bearish analysts highlight that the cut in the target price points to a more conservative outlook on the company’s long term earnings power and cash generation.
The revised valuation framework implies reduced confidence in the pace of growth in key end markets, which may cap multiple expansion in the medium term.
The decision to keep a Hold rating, rather than upgrade, underscores ongoing concerns around execution risks, including cost inflation and project ramp up timing.
Lowered expectations for long term returns could deter new institutional inflows, limiting share price momentum until clearer signs of sustainable growth emerge.

What's in the News

Issued fiscal 2025 guidance, projecting consolidated sales to be 10 to 15 percent below the 2024 level of €1,026.4 million (Company guidance)
Removed from the Germany SDAX (Total Return) Index, reducing its presence in a key German small cap benchmark (Index announcement)

Valuation Changes

Fair value remains unchanged at €3.33 per share, indicating no material shift in the long-term intrinsic value estimate.
The discount rate has fallen slightly from 8.83 percent to 8.75 percent, reflecting a marginally lower assumed risk profile or cost of capital.
Revenue growth is effectively unchanged at around minus 1.46 percent, signaling a stable outlook for top-line contraction.
The net profit margin is stable at approximately 5.81 percent, suggesting no meaningful adjustment to long-term profitability assumptions.
The future P/E has edged down slightly from 11.17x to 11.14x, implying a marginally lower valuation multiple on expected earnings.

Restructuring and strict cost management in the Carbon Fiber business aim to enhance profitability and optimize EBITDA and net margins.
Focus on high-margin services and project acquisitions in the Process Technology unit promises significant profitability improvements and bolsters future earnings.
Challenges in the EV market, Carbon Fiber restructuring, competition, and weakening semiconductor demand threaten SGL Carbon's revenue and earnings stability.

Catalysts

About SGL Carbon

Engages in the manufacture and sale of special graphite, carbon fibers, and composite products in Germany, rest of Europe, the United States, China, rest of Asia, and internationally.What are the underlying business or industry changes driving this perspective?

The restructuring of the Carbon Fiber business, including the closure of unprofitable sites, is intended to improve profitability by focusing on the profitable core of the business, which could eventually positively impact earnings and net margins.
Strict cost management measures have been implemented, including optimizing headcount and reducing indirect spending. These actions are intended to safeguard and potentially enhance EBITDA margins and net margins in the near term.
Process Technology business unit's continued focus on high-margin service offerings and successful acquisition of large-scale projects have led to significant profitability improvements, which could bolster future earnings and margins.
The long-term importance and eventual recovery of the SiC market, bolstered by continued implementation in other markets beyond EVs, presents an opportunity for revenue growth and improved margin stability once current market slowdowns resolve.
Despite challenges in the Carbon Fiber and Composite Solutions segments, the adaptation to changing customer demands and market conditions should help SGL Carbon maintain cash flow positivity, which supports ongoing operations and financial health reflected in net debt and equity ratios.

SGL Carbon Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming SGL Carbon's revenue will decrease by 0.2% annually over the next 3 years.
Analysts assume that profit margins will increase from -15.0% today to 9.9% in 3 years time.
Analysts expect earnings to reach €94.0 million (and earnings per share of €0.59) by about September 2028, up from €-141.1 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.6x on those 2028 earnings, up from -2.9x today. This future PE is lower than the current PE for the GB Electrical industry at 48.3x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.01%, as per the Simply Wall St company report.

SGL Carbon Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The sluggish development in the electric vehicle (EV) market and the resulting slowdown in demand for silicon carbide products could significantly impact SGL Carbon's future revenues and profitability.
The restructuring of the Carbon Fiber business unit, which involves closure of unprofitable sites and a significant one-time cash effect of €50 million, presents financial risks that could negatively affect the company's earnings in 2025 and 2026.
Declining sales and global overcapacity in the Carbon Fiber market, with increased competition from Chinese suppliers creating negative price trends, are likely to impact revenue and net margins adversely.
The termination of a profitable automotive contract in the Composite Solutions business unit has already caused a revenue decline and may continue to affect the unit's future earnings, as it represents a new baseline for sales without that contract.
The weakening of the semiconductor market and dependence on uncertain recovery in EV sales presents a risk to achieving projected revenue growth, which could lead to earnings volatility if the anticipated recovery does not materialize in the second half of 2025.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €3.8 for SGL Carbon based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €947.7 million, earnings will come to €94.0 million, and it would be trading on a PE ratio of 7.6x, assuming you use a discount rate of 8.0%.
Given the current share price of €3.29, the analyst price target of €3.8 is 13.4% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.