Geberit Earnings: Pricing Power Offsets Lower Volumes and Supports Impressive Margin Expansion

Wide-moat Geberit delivered solid first-quarter results, which were supported by the group’s strong pricing power underpinned by its brand reputation and close relationships with key intermediaries of sanitary products. The spillover effect of price increases already implemented managed to offset volume declines and help support 220 basis points of EBITDA margin expansion, to an impressive 33.1%. While demand remains under pressure because of the macroeconomic environment, we believe that Geberit will be able to maintain its current level of pricing, which will support profitability in the future as raw material costs decline against a high comparable. Consistent with our investment thesis, capital returns remain a key priority for Geberit. Share repurchases of CHF 63 million during the quarter helped deliver a disproportionate 8.6% growth in constant-currency earnings per share compared with net income growth of 4.9% (also in constant currency). We maintain our CHF 510 fair value estimate and view shares as fairly valued.