LR: Data Center Expansion And Cash Generation Will Support Balanced Future Performance

Legrand's analyst price target has been nudged higher to about EUR 143, reflecting analysts' slightly stronger confidence in the group's cash generation and expanding data center exposure, despite some mixed rating actions around the EUR 150 to EUR 167 target range.

Analyst Commentary

Recent Street research paints a mixed but generally constructive picture for Legrand, with several target changes and rating moves centering around the EUR 150 to EUR 167 range. The commentary highlights both confidence in the company’s execution and some caution around valuation after the recent share price performance.

Bullish Takeaways

• Bullish analysts point to strong and visible cash generation following the latest quarterly results, viewing this as a key support for the higher price targets around EUR 150 and above.
• The rapid expansion in data center exposure, rising from low single digits to over a quarter of group sales over the past decade, is seen as a structural growth driver that can underpin premium valuation multiples.
• Upgrades to Buy ratings, even when paired with modest cuts in target price, suggest that execution on growth initiatives and margin resilience is seen as sufficient to offset macro and cyclical risks.
• Higher targets in the mid EUR 160s are framed as reflecting upside from continued mix improvement toward higher growth, higher margin segments, particularly in digital infrastructure.

Bearish Takeaways

• Bearish analysts see the current share price as close to fair value around EUR 150, arguing that much of the cash generation and data center growth story is already reflected in the stock.
• The move from more positive to neutral ratings in some cases indicates concern that near term upside could be capped if execution stumbles or if data center demand normalizes from current elevated levels.
• There is caution that, while target prices remain relatively high, the risk reward profile has become less attractive, with limited room for disappointment on margins or capital allocation.
• Some of the recent target trims, even within a constructive long term view, signal sensitivity to broader sector valuations and the possibility of multiple compression if growth moderates.

What's in the News

• Confirmed 2025 earnings guidance, with Legrand expecting sales growth of 10% to 12% excluding currency effects, signaling confidence in underlying demand and execution (Key Developments)

Valuation Changes

• Fair Value has risen slightly, moving from approximately €141.88 to €142.71, indicating a modest uplift in the intrinsic value estimate.
• Discount Rate has increased marginally from about 9.05% to 9.16%, implying a slightly higher required return in the valuation model.
• Revenue Growth has edged up from roughly 7.32% to 7.33%, reflecting a very small upward revision to long term top line expectations.
• Net Profit Margin has improved fractionally from about 14.22% to 14.23%, signaling a minimal enhancement in projected profitability.
• Future P/E has risen slightly from around 29.2x to 29.4x, pointing to a modest increase in the valuation multiple applied to forward earnings.