New Capacity Expansions And Energy Efficiency Will Drive Future Demand

Key Takeaways

• Expansion in key regions and capacity upgrades, including electrified production, position Rockwool to benefit from rising demand linked to energy efficiency and building regulations.
  
• Strong pricing, innovation, and automation enhance market share, efficiency, and premium product positioning, supporting long-term revenue growth and margin resilience.
  
• Sustained economic and geopolitical instability, rising costs, and weak demand threaten Rockwool's growth, profitability, and ability to effectively deploy capital, especially in key markets.

Catalysts

Produces and sells stone wool insulation products in Western Europe, Eastern Europe, Russia, North America, Asia, and internationally.

• Significant project pipelines in North America and commercial/industrial end markets remain intact, with orders delayed but not canceled; once macro uncertainty (inflation, tariffs, interest rates) subsides, a substantial rebound in demand could drive revenue acceleration and margin recovery as utilization improves.
  
• Ongoing and near-term capacity expansions in key growth markets (U.S., Romania, India, West Coast U.S., France), including new electrified production lines, position Rockwool to capitalize on surging demand from tighter building codes and energy efficiency mandates, supporting both top-line growth and higher utilization-driven margin leverage over the medium
• to long-term.
  
• Robust pricing discipline, continued product innovation, and expansion in channels (e.g., U.S. big box retail and new regional customers) are enabling the company to sustain higher average selling prices and capture additional market share, which should translate into improved revenue quality and gross margins as market conditions stabilize.
  
• Sustained investment in digitalization and automation, as well as hiring engineering talent, is set to yield long-term efficiency improvements and lower per-unit costs, supporting structurally higher net margins and resilience against input cost volatility.
  
• Strong regulatory and customer focus on decarbonization, fire safety, and sustainable non-combustible materials continues to favor stone wool insulation solutions, allowing Rockwool to maintain premium positioning and tap into secular retrofit and new-build demand tailwinds that can drive sustained revenue and earnings growth.

Rockwool Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Rockwool's revenue will grow by 4.6% annually over the next 3 years.
• Analysts are assuming Rockwool's profit margins will remain the same at 13.7% over the next 3 years.
• Analysts expect earnings to reach €607.3 million (and earnings per share of €2.87) by about September 2028, up from €530.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.4x on those 2028 earnings, up from 12.5x today. This future PE is lower than the current PE for the GB Building industry at 290.2x.
• Analysts expect the number of shares outstanding to decline by 5.55% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.03%, as per the Simply Wall St company report.

Rockwool Future Earnings Per Share Growth

Risks

• Persistent macroeconomic and geopolitical uncertainty-especially in North America and Eastern Europe-has led to project delays, reduced order flow, and a rapid decline in customer sentiment, potentially leading to stagnant or declining revenues in Rockwool's historically high-growth regions.
  
• Rising operational expenditures, including increased investments in capacity expansion, digitalization, engineering hires, and higher-than-normal maintenance and restructuring costs (e.g., factory closures and unexpected breakdowns), are elevating the company's fixed cost base and putting sustained downward pressure on net margins.
  
• Overcapacity or slower ramp-up of new production facilities could coincide with subdued or delayed market demand, especially in the U.S. and Europe, resulting in underutilized assets and inefficient capital deployment-significantly impacting earnings growth and return on invested capital.
  
• Market-specific pricing power may erode if competitors lower prices in a soft demand environment, or if customers resist price increases due to construction activity slowdowns-impacting Rockwool's ability to offset inflation and cost increases and compressing profitability.
  
• Prolonged lack of visibility and control over the Russian business, ongoing loss of revenue from this region, and potential for further geopolitical developments or sanctions, create structural risk to group earnings and cash flows, with dividends from Russia being the only remaining contribution but subject to high uncertainty.

Valuation

• The analysts have a consensus price target of DKK291.729 for Rockwool based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK360.0, and the most bearish reporting a price target of just DKK249.89.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €4.4 billion, earnings will come to €607.3 million, and it would be trading on a PE ratio of 13.4x, assuming you use a discount rate of 6.0%.
• Given the current share price of DKK237.75, the analyst price target of DKK291.73 is 18.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.