Gurit stock tumbles after UBS downgrade on slowing growth

Gurit's shares plummeted by 11% on Friday following a downgrade from UBS, which shifted the stock's rating from buy to neutral. The downgrade was based on concerns regarding the company's slowing growth prospects in 2027, despite Gurit's strong performance year-to-date. The Swiss composite materials manufacturer has seen its stock price rise by around 400% so far this year, fueled by improved profitability after a wind business restructuring, strong growth in manufacturing solutions, and potential in the subsea defense sector.

UBS maintained a medium-term constructive outlook on Gurit, driven by wind and defense sectors, but highlighted that the positive earnings revision cycle has likely come to an end. The bank raised its price target to CHF57 but cautioned that 2027 might be a transition year for the company. UBS projects that growth in Gurit's wind materials segment, which accounts for about 55% of sales, could decelerate in 2027 due to fewer offshore installations expected between 2028 and 2029.

The company typically operates around two years ahead of offshore installations, according to UBS estimates.

Furthermore, UBS anticipates that sales from manufacturing solutions, making up roughly 15% of group sales, may decline in 2027 as customers' capital expenditure plans become more volatile and face tough comparisons. Margin expansion in 2027 might also be capped as tailwinds from restructuring efforts have already been exhausted.

The bank revised earnings per share by -1% to +3% over the 2026-28 period, reducing growth forecasts for Gurit's wind and manufacturing solutions segments for 2027 while raising projections for 2028 primarily due to defense business.

UBS increased its terminal EBITDA margin by 50 basis points to 10%, acknowledging that Gurit can better protect its profitability than previously. Despite the downgrade, the bank retains a positive medium-term view on Gurit, attributed to the wind and defense sectors.