BofA Securities has upgraded Swiss specialty chemicals producer Sika AG to "neutral" from "underperform" and raised its price objective to 170 Swiss francs, up from 122 Swiss francs. The broker said the move reflects an easing in downside pressures on earnings and a reduced threat to margins following recent declines in oil prices.
"We believe the earnings downgrade cycle is coming to an end and the recent fall in oil prices reduces risks to the margin outlook," the analysts wrote. "We see valuation as fair."
Forecast revisions and financial outlook
BofA raised its 2026-28 earnings before interest and tax estimates by about 5%, citing smaller-than-expected negative currency headwinds, notably a rebound in the U.S. dollar versus the Swiss franc, and somewhat more optimistic margin assumptions after recent price increases.
The broker now projects adjusted earnings per share for fiscal 2026 of 7.45 Swiss francs, rising to 8.17 Swiss francs in 2027 and 8.95 Swiss francs in 2028. On revenue, BofA expects fiscal 2026 sales of 11.36 billion Swiss francs, increasing to 11.87 billion Swiss francs in 2027 and 12.21 billion Swiss francs in 2028.
BofA also said it expects Sika to deliver toward the upper end of the company’s full-year 2026 local currency sales growth guidance of 1% to 4%, forecasting 3.5% growth for the year.
Valuation approach and multiples
The revised price objective is underpinned by target multiples of 20 times price-to-earnings and 13 times EV/EBITDA applied to the 2027-28 estimates, up from prior targets of 18 times and 11 times respectively. BofA said those multiples still represent about a 35% discount to historical averages to reflect lower returns on invested capital.
BofA warned that there is "limited potential for a re-rating, as the stock already trades at a premium to its current returns on investments." The broker cited a free cash flow yield of approximately 5% and a dividend yield of approximately 2.4%.
Operational and regional developments
Volume patterns across Sika’s regions appear broadly on track, according to BofA. The Middle East, which accounts for about 4% of group sales, showed renewed momentum in April and May after disruption in March. In the United States, accelerating growth in data centres is helping to offset weakness in rate-sensitive construction segments.
In Asia Pacific, BofA reported early signs of stabilisation in the China property market, while India continued to show strong growth and Japan remained resilient.
Margin outlook
On margins, BofA noted that Sika’s stated target of a 19.5% to 20% EBITDA margin for 2026 "could be challenging to deliver," but added this ambition is already largely priced in by consensus, which sits at 19.2%. BofA’s own forecast for the 2026 EBITDA margin is 18.9%.
Analyst view and positioning
Overall, BofA’s actions combine a modest lift to earnings and sales forecasts with a higher valuation framework, while retaining a cautious stance on potential re-rating given the company’s return profile. The upgrade to neutral signals a more constructive near-term view, driven by reduced margin risk from lower oil prices and pockets of stronger end-market demand such as U.S. data centres.