Flughafen Zürich stock climbs as UBS upgrades rating to 'buy'

Investing.com -- Shares of Flughafen (VIE:VIEV ) Zürich AG (SIX:FHZN ) rose following an upgrade by UBS, which revised its stock rating to "buy" from "neutral." 

The decision, announced in a research report on December 4, reflects UBS analysts' optimism about the company's growth potential and upcoming catalysts.

UBS identified three key factors likely to drive a re-evaluation of Flughafen Zürich's stock. First, the airport's board is set to update its dividend payout policy in early 2025, with a potential increase in dividends being a major driver of investor interest. 

UBS's base case assumes a 60% payout ratio but notes the possibility of a higher yield linked to a combined fixed and variable dividend structure. 

Such a move could elevate the stock's appeal, offering a yield between 3.8% and 4%, a historically low valuation for the company.

Second, the anticipated opening of the Noida International Airport in India, slated for April 2025, is expected to crystallize value for Flughafen Zürich's international operations. 

UBS estimates that Noida already represents about 8% of the company’s current market capitalization and predicts significant EBITDA growth from this asset in the coming years.

Lastly, UBS flags the potential for increased airline capacity allocated to Zurich Airport starting in 2026, driven by fleet expansions and operational shifts within its key partner, Lufthansa. 

This development could accelerate passenger traffic growth and further strengthen Flughafen Zürich’s earnings profile.

In addition to these factors, UBS has raised its price target for the stock to CHF 244 from a previous CHF 205, reflecting an adjusted sum-of-the-parts valuation. 

The new target incorporates higher valuations for the company's retail business and international operations. 

The stock, currently trading at CHF 217, has thus been positioned as undervalued relative to these projections.

UBS's analysts underline that Flughafen Zürich combines defensive characteristics with growth potential, supported by strong free cash flow and a manageable leverage profile. 

Source: Investing.com