Legrand
Note: This is a daily stock update and the information stands true as of 03/10/25, 09:00 CET.
Company Update:
Expert Opinion:
Because the deal is US datacenter/ AI-related, it is likely to be well taken. And in all fairness, it is probably quite strategic for the group in that field (please book a call with our analyst if you want to know more). But valuation is quite stretched. Furthermore, our expert cannot help wondering why a US group would sell such a potentially attractive asset (AI/ Datacenter) to a French group. Could this be an early sign that the AI capex-related trend is peaking? It is probably too early to say but he eagerly awaits the feedback of our analyst once he has spoken to the company. Still 3x sales for electric equipment looks quite expensive to him and he see too little upside in Legrand (trades at PE25 of 28.5 and PE26 of 26.3) to be positive on the name.
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Company Update:
Legrand has announced the acquisition of Avtron Power Solutions, a company based in the US for an enterprise value of $1.13bn. Avtron is expected to generate sales of $350m in 2025, implying an EV/Sales multiple of c.3x. This appears somewhat expensive compared to the multiples Legrand has paid traditionally for its acquisitions on average but given that the acquiree caters to the Datacenter market, we don't believe the multiple is too high. With regards to the rationale, the acquisition is clearly in line with Legrand's strategy of strengthening its position in the Datacenter market, particularly the grey space and expanding its portfolio of offerings that address PUE (Power Usage Effectiveness) of a Datacenter.
This is another positive step by the group but we don't anticipate a change in our recommendation due to already expensive valuations. So, we recommend existing investors to hold the stock, while new investors should await a better entry point.
Because the deal is US datacenter/ AI-related, it is likely to be well taken. And in all fairness, it is probably quite strategic for the group in that field (please book a call with our analyst if you want to know more). But valuation is quite stretched. Furthermore, our expert cannot help wondering why a US group would sell such a potentially attractive asset (AI/ Datacenter) to a French group. Could this be an early sign that the AI capex-related trend is peaking? It is probably too early to say but he eagerly awaits the feedback of our analyst once he has spoken to the company. Still 3x sales for electric equipment looks quite expensive to him and he see too little upside in Legrand (trades at PE25 of 28.5 and PE26 of 26.3) to be positive on the name.
For daily updates, subscribe to our newsletter and for detailed information, reach out to us at sales@alphavalue.eu
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