Geberit Delivers a Disappointing Q4 Trading Update; Long-Term Thesis Remains Intact

The destocking of inventories from record levels at wholesalers was cited as the major reason behind wide-moat Geberit's disappointing fourth-quarter trading update. Organic revenue decreased 7% during the fourth quarter, which implies a decline in volumes of nearly 20% (somewhat offset by a 13% price increase). A weak print was largely anticipated, albeit not to this extent, as indicated by company-provided fourth-quarter consensus of 2.8% organic revenue growth. However, the share price is largely unchanged on Jan. 19. We believe the market is correctly adopting a long-term approach and awarding the business the benefit of the doubt, given its track record for market share growth from its mostly private and smaller competitors, resilient profitability, as well as its attractive cash yields (dividend plus share repurchases). We reiterate our CHF 505 fair value estimate and still see some upside from current levels.