LafargeHolcim Morocco: MSIN expects earnings CAGR of 6.5% over the period 2022-2026

The group is expected to experience a drop of nearly 19% in its net income this year due to the drop in demand and the increase in inputs. But, as of next year, the NIGS and the dividend should increase. Profits should reach 2,101 MDH in 2026, after an average annual growth of 6.5%.

In a note published last week, the research company MSIN returned to the performance of the LafargeHolcim Maroc group in the first half and drew up its outlook on the stock. The research firm notes that the group is currently operating in an unfavorable sector context.

It considers that the value is correctly valued at 1,436 dirhams and recommends keeping the title in the portfolios.

It should be recalled that LafargeHolcim Morocco posted, in the first half, stable turnover compared to the first half of 2021, at 4,004 MDH. At the same time, the group’s net income fell by 27% over the period, to 759 million dirhams. This decline was caused by inflation and the sharp rise in the cost of inputs, particularly petcoke. The research company recalls that after a good year in 2021, “the construction and public works sector will find itself in 2022 faced with a rise in the prices of building materials and energy, as well as supply difficulties which generate delays in certain ongoing projects”. In the endcement consumption fell by more than 9% at the end of October 2022.

Note that the deterioration in margins and net income observed in H1 is also caused by the new plant in Agadir. Not yet running at full speed, the fixed costs are not fully compensated, which weighs on the group’s margins.

LHM revenues are expected to show a CAGR of 2.5% over the period 2022-2026

However, the country’s leading cement company enjoys a strong position in the country and should resume a normal growth path next year.

Indeed, the group will be able to count on various advantages, in particular “the commissioning of the new cement plant in Agadir-Souss with a production capacity of 1.6 Mt per year. This cement plant would allow the group to continue its development in the south of Morocco”. It should also be noted that LafargeHolcim Morocco is counting on the export of clinker and cement in the regions of West Africa and South America, via its subsidiary LHM Africa.

MSIN expects an average annual growth rate of 2.5% over the period 2022-2025. The group should succeed in maintaining its turnover level this year, in particular thanks to the increase in selling prices. It should remain at 7,945 MDH this year against 7,932 MDH last year.

The research company also highlights the fact that the group has a comfortable position in the country’s major infrastructure projects such as “the Casablanca shipyard, the Taza wind farm, the construction of large dams, the construction of towers at CFC, the Mohammed VI Polytechnic University of Rabat and the Tiznit-Dakhla expressway”.

Profits and dividends on an upward trend in the years to come

Despite the current unfavorable context, the group should, except for this year, experience growth in its profits. In 2022 with the known pressure on margins and profitability, the research company expects an 18.6% decline in RNPG to 1,635 MDH.

Thereafter, an CAGR of 6.5% is expected at the level of the RNPG over the period 2022-2026 to reach 2,101 MDH at maturity. A good performance of the dividend is also expected over the period. A drop is expected this year with a projection of a dividend of 54 dirhams this year against 66 dirhams in 2021.

In 2023 and 2024, dividends per share are expected at, respectively, 59 and 65 dirhams.

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