Morningstar | Strong Start to Heidelberg’s 2019 in Seasonally Weak First Quarter; Shares Look Undervalued
HeidelbergCement started the year off well. Like-for-like revenue and EBITDA rose 15% and 26%, respectively. Volume rose across all materials. Combined with margin expansion across all product categories, companywide EBITDA margin expanded about 60 basis points on a like-for-like basis. In all, the company had solid performance across the board in the first quarter.However, the first quarter tends to be the least important quarter in the highly seasonal building materials industry. In 2018, the first quarter only accounted for 8% of full-year EBITDA. Therefore, it is hard to draw too many conclusions about the company’s full-year outlook based on the first quarter. As a result, we have left our forecast largely intact and left our fair value estimate of EUR 82 unchanged for narrow-moat HeidelbergCement. Shares currently trade in 4-star territory, offering shareholders attractive risk-adjusted upside.
HeidelbergCement shares have risen more than 30% for the year to date, outperforming global peers Cemex, CRH, and LafargeHolcim. As we stated in our previous note, shares traded at about EUR 80 per share as recently as early 2018, and we see little reason to warrant the change in market sentiment. Although last year’s performance was disappointing at a cursory glance, we saw the biggest challenges as temporary. We think the strong first-quarter results confirm our view, and we continue to believe that strong underlying demand should drive better performance in the years to come.
HeidelbergCement is engaged in the production and distribution of cement and aggregates, concrete and building products. Co.'s product range is complemented by downstream activities, such as ready-mixed concrete, concrete products, and concrete elements; in some countries, asphalt and building products, such as bricks and roof tiles, lime, or sand-lime bricks, are also manufactured. Furthermore, Co. provides services such as worldwide trading in cement and coal by sea. Co.'s products are used for the construction of houses, infrastructure, and commercial and industrial facilities.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.