“Our interest in the CIMAR group comes in an opportune sectoral context, marked by the favorable prospects for resumption of cement consumption in Morocco and the recent announcement relating to the acquisition of the cement manufacturer Asment de Témara by the listed operator,” explains AGR in a recent “Research paper – Equity”.
Taking into account the expected synergy effects of this operation and on the basis of its growth hypotheses during the period 2024-2026, AGR has carried out a review of the valuation of CIMAR. “At the end of this exercise, we emerge with a target share price of 2,220 DH offering a potential appreciation of 21% compared to the price of November 12, 2024.”
According to the same source, AGR’s recommendation is based on several points, including the anticipation of a clear recovery in cement consumption in Morocco during the period 2024-2026, through an average annual growth rate ( CAGR) of 7%, compared to -1.7% observed over the last decade.
On the commercial level, the acquisition of Asment de Témara would allow CIMAR to gain market share points, despite the entry of the new operator Novacim. Also, the group should extend its presence to a region offering good prospects in terms of cement consumption, namely the Rabat-Salé-Kénitra axis.
On the operational side, this acquisition offers Ciments du Maroc interesting avenues in terms of cost optimization, particularly at the organizational, logistics and decarbonization strategy levels. Thus, AGR forecasts a gain of at least 2 points (pts) in the group’s EBITDA margin (gross operating surplus) by 2026.
And to maintain: “Historically, investors criticized CIMAR for its poorly optimized financial structure through an unlevered balance sheet and a relatively ‘expensive’ financing cost which is based exclusively on Equity”.
According to AGR estimates, this operation would allow Ciments du Maroc to increase the debt burden to 40% in its financial structure, inducing a drop in its average WACC (Weighted Average Cost of Capital) of 9.53% during the period 2021-2024 to 6.84% from 2025.
“CIMAR’s profile corresponds to our investment logic which prioritizes balance sheet quality, margin levels, cash generation and low volatility of LT (long term) growth,” notes AGR.
During the period 2024-2026, the operator displays a manageable working capital requirement (WCR) of 9% of turnover (CA), an attractive EBE margin of 43.5%, a CFO (Operational Cash Flow) ratio )/comfortable turnover of 28% and an LT growth profile that outperforms GDP.
MAP 131844 GMT November 2024
