Genuit – a genuine climate leader

Summary

Net-zero targets approved by SBTi. In June 2024 SBTi approved Genuit's net-zero GHG emission reduction targets, including a 90% reduction in scope 1,2, & 3 emissions by 2050. Genuit has held the LSE Green Mark since 2019 and has over 70% green revenues (2023).

Recycled plastics now 51% of raw materials. Genuit has steadily increased its use of recycled plastics, reducing its reliance on virgin polymers. Recycled plastics are now 51% of raw materials (2025 H1) and we think this will rise gradually to c.62% by 2030.

Stock offers decent value. We think Genuit represents an opportunity for investors to buy shares in a high margin business at reasonable valuation and near the trough of the construction demand cycle. The current share price of 360p gives a forward PER of 14.8x and dividend yield of 3.5% and a free cash-flow (FCF) yield of 7.4%.

Next announcement. Full year results expected to be announced on or around 11 March

Investment proposition

We like Genuit’s exposure to climate change solutions and management’s unwavering commitment to  invest growth capital in these areas. More information on this is provided in management’s most recent “Strategy Progress Update” (click here)

Genuit (previously called Polypipe) is historically one of Europe’s largest manufacturers of plastic piping and fittings with number one market positions in the UK. Following its 2014 IPO it diversified into areas such as ventilation systems and flood alleviation systems. It boasts an LSE Green Economy Mark and 51% of its polymer raw materials comes from recycled plastics (2025 H1). Management claims this is higher than European peers.

The company is organised into three key business units, or climate action ‘verticals’: Climate Management Solutions (29% of 2025H1 revenue); Water Management Solutions (29%); and Sustainable Building Solutions (40%). Group revenues are evenly exposed to residential, commercial and civil construction end markets.

Figure 1: Revenue split in 2025 H1

Despite cyclically depressed end demand, Genuit posted an underlying operating margin of 15% in 2025 H1 and a modest 2.4% increase in DPS to 4.2p. We think this demonstrates Genuit's entrenched market positions, deep competitive moats, and management’s efficiency programmes.

The shares look inexpensive with a free cash flow yield of 7.4% and PER of 14.8x (based on cyclically depressed 2025 earnings). It is often wise to buy quality stocks at the bottom of the cycle when ‘Mr. Market’s’ mood is darkest – for Genuit this could be now!

 

“Together we create sustainable living”

Genuit’s ‘Sustainability Framework’ is based on near and long-term 2050 emission reduction targets, which are both SBTi-approved. Genuit has agreed to reduce scopes 1, 2 & 3 GHG emissions by 90% in 2050 (versus 2021 base year) which is consistent with UK peer, Volution plc (click here to read our Volution note).

Genuit’s extrusion machinery is power intensive and all manufacturing sites use 100% renewable energy, with the figure for the whole group at 96.3% (2024). Genuit is progressing well in reducing absolute Scopes 1 & 2 emissions with a reduction of 32% in 2024 versus 2021 base year (marginally higher than the 30% reduction targeted for 2027). Carbon intensity needs more work, in our view, as the 54% reduction in 2024 (versus 2019 base year) is still 12% short of the 66% reduction targeted by 2025.

As with most manufacturing businesses, Scope 3 dominates the GHG emissions mix (2024: 96% of total) and Genuit has said that by 2027, at least 83% of suppliers by emissions covering purchased goods and services will have SBTi approved targets in place. This compares to just 28.1% in 2024 and we think signals quite the revolution in the audit and control of Scope 3.  

Figure 2: Key SBTi approved targets

Increasing use of recycled plastic

Raw materials are primarily polymers such as PVC and polyethylene. Genuit is one of the largest buyers of recyclates in the UK and as a percentage of total raw materials purchased, recyclates has risen steadily from c.30% in 2016 to 51% in 2025 H1.

We expect further progress out to 2050 with recyclate content growing by 2-3% per annum, but we note that this is restricted by factors such as plastic recycling capacity in the UK, the higher purity and consistency offered by virgin polymers, and the British regulatory standards that governs the extent that recycled materials may be used in certain products.

Figure 3: Example of recycle plastics used in Genuit products

The environmental benefits of recycled plastics over virgin polymers are indisputable. In the marine world, an estimated 100,000 marine mammals die each year from plastic pollution due to c.14m tonnes of waste plastic entering the oceans (source: www.tide.earth). The mandatory recycling of waste plastics into recyclates must surely therefore be imminent.

Furthermore, models constructed by the US Environmental Protection Agency suggest that recycling certain plastics can lower lifecycle GHG emissions of plastic products by 40%-60% (source: www.epa.gov). This concurs with a 2022 study by Ganesan et al which states that the carbon footprint of plastics is cut by a third if 40% of virgin polymers used in the manufacturing process are replaced by recyclates (click here).

 

Shares now offer decent value

At the current share price of 360p, Genuit trades on a forward (2025) PER of 14.8x and dividend yield of 3.5% (using 2025 consensus forecasts of 24.3p for underlying EPS and 12.7p for DPS). This looks reasonable to us given that earnings are cyclically depressed given weak UK construction demand.

However, residential planning applications in England recently hit a 4-year high (click here) and we think a turn in the housebuilding cycle may be key to a sustained recovery in UK construction markets. Genuit has relatively high operating leverage with fixed costs such as labour and operating leases making up c.30% of revenues (2024). Management claims the business is currently operating with 25% spare capacity. A cyclical recovery in end demand (and the geared effect on Genuit's earnings) would therefore boost earnings forecasts and drive share price performance.

Genuit has average cycle operating margins of c.16% and has good control over working capital, leading to excellent cashflows. Over the last three years (2022-2024) underlying free cash flow (FCF) has averaged £67m per annum, implying an attractive 3-year trailing FCF yield of c.7.4%.