Analyst Note| Matthew Donen, CFA |
Narrow-moat Holcim managed to push through price increases, which supported third quarter organic revenue growth of 5% and helped offset inflationary pressure. A positive price over cost spread in Q3 allowed management to raise full year EBIT growth guidance to at least 22% from 18%, having already lifted guidance in the previous quarter. We believe shares are trading at attractive levels and we're maintaining our CHF 56 fair value estimate. The current share price implies an Enterprise Value to estimated 2021 EBITDA multiple of below 6 times, a discount to historical average. We believe share price underperformance is due to ESG concerns surrounding Holcim’s large cement business, which is a notorious contributor to carbon emissions. Portfolio management has helped reduce the revenue contribution from energy-intensive cement operations.