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Titan Cement | Cementing growth

2022: (Energy) Crisis averted… – Despite the adverse macro in 2022, with energy prices and freight costs at all-time highs, Titan delivered 20% yoy growth in EBITDA during the year (and 24% above the 2019 mark), materially above our expectations at the start of 2022 on the back of strong pricing across all regions. The recent easing of the energy crisis has improved group prospects, something also reflected in the share price, with Titan advancing +20% YTD outperforming the ASE Index.

2023: 2-digit EBITDA growth underpinned by pricing… – The key theme for the industry in 2023 is the extent of price resilience, especially in the light of the unwinding of energy costs which supported pricing last year. Commentary by Titan’s management and several foreign peers indicates continuation of the pricing momentum at the start of the year (in the mid to high-single-digits), which bodes well with our assumption for 4% revenue growth in 2023 for Titan (with pricing more than offsetting the FX headwind). On the cost side, distribution expenses are set to fall but energy costs are likely to stay elevated as we expect the positive effect from retreating power prices to be diluted by the new contracted PPA tariff (currently under negotiation with PPC). Overall, we envisage opex/sales ticking 10bps higher yoy but with the positive operating leverage still leading to 2-digit EBITDA growth yoy (€370m). Across the regions, we expect Greece to be the main driver of growth in 2023 along with the US.

Long-term: EBITDA rebasement, capex normalization, improving ESG footprint – In the long run, we are reasonably sanguine about the US market (57% of EBITDA), which we expect will be the key pillar of growth following the conclusion of the group’s $300mn investment program (end 2023), which will help increase the capacity of the import terminal and optimize processes. Following years of tepid performance, Greece is also set to emerge as an additional key growth contributor, with our estimates envisaging a re-basement of EBITDA near €50m in 2023, with further growth post 2024 as construction activity accelerates. At group level, the profit bounce (EBITDA >€400m in 2025e) along with normalization of capex (to €100-130m annually) will translate into improved FCF generation and a reduction of Net Debt/EBITDA to 7x). Although the stock does not screen out as an outlier in terms of valuation among its peers, we argue that Titan will move higher in the valuation spectrum narrowing the valuation discount relative to lightside names (which trade at multiples >8x) as it executes its environmental-friendly strategy.