Holcim builds on new heights

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  Christian Ingerl
  Redaktor

There are techs – and there is Holcim. While the former are traded as growth stocks and are among the stars of the stock market, companies from the construction industry are generally much less popular. This does not apply to Holcim. Following strong figures for the third quarter, the SMI share continued its impressive rally and reached an all-time high in the days that followed. Since the beginning of the year, the gain has now amounted to around 60% – a figure that puts Holcim in first place in the SMI ranking this year. Investors are thus rewarding the robust operational development and the strategically promising positioning of the building materials giant in the sustainable construction sector.

Strong figures, clear plan

Holcim is laying the foundations for a new era of construction and is demonstrating with its successful operating performance that the concept is well received by the market. In the first nine months, adjusted earnings before interest and taxes rose by almost a tenth in local currency, while sales increased by 2.9%. At the same time, the operating margin climbed by an impressive 80 basis points to 19.1%. Management is consistently focusing on value creation rather than volume and is benefiting from the growing proportion of sustainable products and an efficient cost structure. “We have expanded our sustainable offering to meet customer demand and also increased the pace of decarbonization and circular construction in order to continue to grow profitably,” explains CEO Miljan Gutovic.

The CEO is also optimistic about the future: Holcim should achieve EBIT growth of 6% to 10% with a margin of more than 18% for the year as a whole. The planned takeover of Xella, a European market leader for sustainable wall systems, is also a source of inspiration. The deal gives Holcim access to a market worth billions for innovative wall solutions – and strengthens its position with architects and developers at an early stage. According to Gutovic, the takeover is also in line with the “NextGen Growth 2030” strategy.

Promising roadshow

At Holcim’s subsequent roadshow after the interim report, much of the discussion revolved around two key factors: pricing and decarbonization. Thanks to high delivery reliability, technical expertise and growing demand for_low-carbon building materials, the Group believes it is in a strong position to maintain its pricing power in the long term. In addition, emissions regulations are tightening in Europe, an advantage for Holcim, whose plants are among the most efficient in the industry. Hocim has 7 funded CCUS (Carbon Capture, Utilization and Storage) projects in Europe and management emphasized that these are significantly supported by the EU Innovation Fund. The company also expects that smaller competitors with inefficient plants will find it difficult to survive in the long term, which in turn could lead to consolidation opportunities. Fully decarbonized cement is also likely to achieve price premiums in the future – a further lever for margins.

The current regional picture is varied, but nevertheless consistent. Europe is slowly recovering, with particularly positive trends in the east of the continent. Latin America is in turn benefiting from the massive demand for housing and infrastructure projects, and the outlook in North Africa and Australia is also positive due to the high demand for housing and infrastructure expansion. In difficult regions such as Lebanon, Iraq and sub-Saharan Africa, Holcim has reduced its business or even withdrawn completely.

Investment solutions

Although the majority of analysts recommend the share as a buy, the average share price potential is now manageable at 4% – hardly surprising after the strong rally. The company value of the building materials giant has more than doubled within two years. And yet the momentum speaks for the domestic blue chip. Opportunity-oriented investors can even accelerate the climb with leveraged securities. Leonteq’s Long Mini Future MHOCRT, for example, which is listed on the SIX, is suitable for this. The leverage is 4.5 and the stop loss level is CHF 55.8075, which is more than a fifth of the current price level. The Mini Future S9SBGU from UBS has even more power with a multiplier of 8.0, but it should be noted that the stop loss level of CHF 62.8278 only offers a buffer of around one tenth.

Conservative investors who expect a short-term breather can achieve attractive returns with sideways products – and at the same time benefit from Holcim’s strong long-term fundamentals. The Barrier Reverse Convertible RHOAQV from Bank Vontobel would be a suitable investment vehicle for this. The maximum yield of 5.11% p.a. is well hedged with a risk buffer of 28.5%. The term ends on August 17, 2026.