Goldman Sachs reiterates Buy on Prysmian and raises target price to €161

Overview

This report focuses on Prysmian's earnings elasticity amid rapidly rising fiber prices and expanding AI data center demand, especially changes in revenue, costs, and EBITDA margins in the Digital Solutions business. Goldman Sachs reiterates its Buy rating and raises the target price to €161, citing resilient recent transmission and distribution demand, improved Digital Solutions margin expectations, valuation roll-forward, and a higher valuation multiple.

Core views

The core view is that the global fiber market is moving from the post-destocking trough of 2025 into a phase of supply-demand tightness, with AI data centers, DCI, BEAD broadband subsidies, defense applications, and high-density fiber demand jointly pushing up prices. Leveraging its global scale, positioning in FlexRibbon, Sirocco Extreme, and Hollow-Core Fiber, and approximately 2/3 in-house fiber production capacity, Prysmian is poised to benefit from the upswing in prices. The report expects the company may raise 2026 adjusted EBITDA guidance to €2.75-€2.9bn in 2Q26 and raise 2028 guidance to €3.95-€4.15bn in FY26 or earlier.

Analysis framework

The report uses a bottom-up Digital Solutions forecasting framework, breaking the business down into Channell, data center fiber cables, telecom fiber cables, MMS, and bare fiber, and separately estimating price, volume, raw material costs, energy and labor costs, framework agreement duration, and EBITDA contribution. On valuation, it continues to use a relative-industry EV/IC and ROIC/WACC framework, with reference to valuations of global electrical equipment peers.

Methodology notes

• Valuation methodsEV/IC vs ROIC/WACC

  Assess Prysmian's valuation relative to global electrical equipment peers using the relationship between invested capital multiples and return on capital/cost of capital.

  The target price remains based on the industry's relative EV/IC versus ROIC/WACC framework, while also incorporating upgraded earnings forecasts, valuation roll-forward, and a higher multiple.

• Earnings forecastBottom-up Digital Solutions model

  Break down sales, pricing, volume, and cost drivers by sub-business, then aggregate them into EBITDA and margins.

  The model separately handles Channell, MMS, data center fiber cables, telecom fiber cables, and bare fiber, while considering G.652/G.657 prices, copper, plastics, steel, germanium, helium, natural gas, silica, as well as labor and energy costs.

• Sensitivity analysisSensitivity of fiber prices and framework agreement duration

  Examine the impact of increases in G.652/G.657 prices and 1-3 year framework agreement duration on FY26 Digital Solutions EBITDA margin.

  The report believes framework agreements will delay the pass-through of rising prices into margins, but margin elasticity will gradually emerge as contracts roll over.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Prysmian (PRY.MI)

  Core covered name in the report; BUY maintained and target price raised.

  Strengths

  Leading global scale, roughly 2/3 self-supplied fiber, Digital Solutions benefits from data centers and rising fiber prices, with positioning in FlexRibbon, Sirocco Extreme, and HCF technologies.

  Weaknesses

  Constrained in the near term by 1-3 year framework agreements; spot costs for externally procured fiber may pressure profits; Digital Solutions accounts for only about 8% of group sales.

  Comparison

  The report believes the company still trades below the average PEG of the European capital goods sector and values it using a global electrical equipment peer EV/IC and ROIC/WACC framework.

  Risks

  Falling fiber prices, failure to secure hyperscaler framework agreements, value dilution from M&A, and project delays or execution issues.

• Digital Solutions

  The key business segment behind Prysmian's earnings upgrades.

  Strengths

  Slightly more than 50% of sales are exposed to fiber, and data center and telecom fiber demand provide dual drivers of pricing and volume.

  Weaknesses

  The business includes Channell, MMS, bare fiber, and fiber cables, with a complex cost structure; margins are affected by raw materials, energy, labor, and framework agreements.

  Comparison

  The report expects EBITDA margin to reach about 28% in 2028, a significant improvement from less than 20% in 2025.

  Risks

  If framework agreements have longer durations or rising fiber prices cannot be passed through, margin elasticity will be lower than expected.

• Global fiber market

  The main external driver of Prysmian's earnings elasticity.

  Strengths

  AI data centers, DCI, BEAD, military drones, and government-subsidized infrastructure create structural demand.

  Weaknesses

  Supply expansion takes time, and raw materials such as germanium, helium, and plastics face geopolitical and shortage risks.

  Comparison

  Peers such as Corning, Furukawa, Fujikura, and Nokia all indicate destocking has ended and are advancing capacity expansion.

  Risks

  A concentrated release of new capacity, slowing demand, or changes in subsidy policy could reverse the price cycle.

Key data

• RatingBUYGoldman Sachs maintains its Buy rating on Prysmian.
• 12-month target price€161.00The previous target price was €126.
• Current price€150.30Price disclosed on the report cover.
• Implied upside7.1%Based on the target price and current price.
• Market capitalization€39.3bn / $45.7bnDisclosed in Key Data of the report.
• Enterprise value€45.1bn / $52.5bnDisclosed in Key Data of the report.
• 3-month ADTV€141.8mn / $165.3mnDisclosed in Key Data of the report.
• Increase in FY27/28E adjusted EBITDA forecasts+4% / +8%Reflects resilient T&D demand and improved Digital Solutions margin expectations.
• Difference versus consensusabout +9% for FY27E, about +12% for FY28EGoldman Sachs forecasts are above market consensus.
• Digital Solutions margin outlookabout 28% in 2028Below 20% in 2025, benefiting from fiber prices and demand.
• Digital Solutions fiber-related exposureslightly above 50%Digital Solutions itself accounts for about 8% of group sales in FY25.
• G.652 bare fiber price>$10/f-kmA significant rebound from about $3.70/f-km in mid-2025, and double the level of January 2026.
• G.657 price$35/f-kmHigh-density, bend-insensitive fiber used in data center applications, commanding a premium.
• Data center fiber demandabout +76% yoy in 2025, about 30% of global fiber demand in 2027Share was below 5% in 2024.
• Prysmian potential hyperscaler framework agreementmore than $5bn in revenue, with a possible term of 5-10 yearsManagement said it is still in the final negotiation stage.
• Prysmian capacity expansion plan40%-50% increase in fiber and cable capacity over the next three years, with capex of about $1.2bnIntended to meet hyperscaler demand.

Impact & implications

If fiber supply-demand tightness persists through around 2028, Prysmian's Digital Solutions business could achieve margin expansion from pricing, product mix, and demand for high-density data center connectivity. Its vertical integration and local production capacity in Europe and the U.S. help mitigate raw material shortages and risks from U.S. domestic sourcing policies, but the pace of profit realization depends on framework agreement rollovers, spot costs for externally procured fiber, execution of capacity expansion, and signing of hyperscaler agreements.

Risks

• If Section 232 copper/aluminum tariffs are reversed, related pricing or competitive advantages may weaken.
• Order backlog delays, cancellations, or execution issues, especially in offshore wind projects, may weigh on earnings.
• If M&A fails to create value, it may lead to value dilution.
• A decline in fiber prices or failure to sign hyperscaler framework agreements would weaken the margin expansion thesis for Digital Solutions.
• Intensifying competition in the low-voltage business may create pricing pressure.
• Shortages or price volatility in key raw materials such as germanium, helium, natural gas, and plastics may compress margins.
• If capacity expansion comes later than expected or incurs cost overruns, realization of volume and profits in 2027 and beyond may be affected.

What to watch

• Whether 2026 adjusted EBITDA guidance is raised to €2.75-€2.9bn in 2Q26.
• Whether 2028 guidance is raised to €3.95-€4.15bn in FY26 or earlier.
• Whether a multi-year framework agreement with a hyperscaler is signed, as well as the contract duration, price pass-through, and revenue recognition cadence.
• Spot prices of G.652 and G.657 fiber, and price trends of raw materials such as germanium and helium.
• Progress of Prysmian's 40%-50% fiber and cable capacity expansion over the next three years.
• The actual order uplift for local suppliers from U.S. BEAD and the Build America, Buy America Act.
• Potential approximately €4bn M&A, a reset of 2028 targets, 2031 long-term guidance, and U.S. listing plans.