CRH Is Best Protected of the European Building Material Manufacturers Against Higher Energy Costs

European building material manufacturers have reversed any share price gains they had made year to date since Russia invaded Ukraine on Feb. 24. While the direct exposure to both Russia and Ukraine is no more than 1% across our coverage, the energy-intensive manufacturing process (most notably for cement) has spooked investors due to rising energy prices as Russian supplies of critical oil, gas and coal are shunned. Although it is too early to comment on the sustainability of recent commodity price movements, we believe narrow-moat CRH, HeidelbergCement and Holcim will be able to manage higher energy prices without us needing make significant changes to our fair value estimates. The sector is undervalued with an average price/fair value ratio of 0.79 on March 8.