- First-quarter sales top estimates
- CRH lime acquisition to boost growth
- Analysts see nearly 50% upside
Raw materials group SigmaRoc (SRC:AIM) signaled a positive start to 2024 ahead of its AGM (annual general meeting) and said the board was ‘confident in the firm’s ability to make further progress in the current year and beyond’.
The shares gained 0.6p or 1% to 64.4p in line with other mining and materials stocks.
GROWING FAST
The group said its performance in the first three months of the year had been solid, with underlying group EBITDA (earnings before interest, tax, depreciation and amortisation) in line with expectations thanks to tight cost control and continued margin improvement.
Volumes were marginally ahead of budget, contributing to revenue of £214 million for the quarter, and the integration of the acquired Czech, German and Irish businesses was progressing well.
‘While there is no major change to underlying economic conditions, with some markets performing well, and others still experiencing some softness in demand, SigmaRoc’s diversified position, and focus on industrial markets, especially since the transformational lime acquisitions, puts the group in a strong position,’ the firm added.
Last month, SigmaRoc used its debt facilities to buy the UK’s market-leading lime operations from Irish firm CRH (CRH) for €155 million or roughly eight times 2022 operating profits.
Management believes lime and limestone are attractive given diversified end markets, high barriers to entry and pricing power given the materials are critical to a number of essential industries.
EXPERT VIEW
Numis analysts Christen Hjorth, Chris Millington and Jonathan Coubrough raised their 2024 to 2028 EPS (earnings per share) forecasts for SigmaRoc by 3% per year on the news of the completion of the CRH lime deal.
After a follow-on deal to buy CRH’s Polish lime assets, which is expected to complete later this year, the team estimate SigmaRoc shares would trade on a PE (price-to-earnings) ratio of around seven times with a 14% free cash flow yield.
The team has a Buy recommendation and a 95p share price target, just shy of 50% above today’s price, based on what it believes are ‘more sensible valuation metrics’ such as a PE ratio of 10 times and a 9% free cash flow yield.
