EXECUTIVE SUMMARY
Our interest in CIMAR Group comes in an opportune sectoral context, marked by the favorable expected recovery of cement consumption in Morocco and the recent announcement related to the acquisition of the cement manufacturer Asment de Témara by the listed operator.
Taking into account the expected synergy effects of this transaction and based on our growth assumptions during the 2024E-2026E period , we have revised up CIMAR valuation. At the end of this exercise, we come out with a target price of MAD 2,220 offering an upside potential of +21% compared to the price as of November 12th 2024. Thus, we recommend BUYING CIMAR stock.
Our recommendation is based on 4 main points:
- During the period 2024E-2026E, we forecast a significant recovery in cement consumption in Morocco, through an AAGR of +7.0% against -1.7% observed over the last decade(1). Beyond the start of major infrastructure projects, our scenario is supported by the recovery in the self-construction segment after several years of sluggishness due to the succession of drought years;
- 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. In addition to this, 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 level, this acquisition offers CIMAR interesting opportunities in terms of cost optimization, particularly at the organizational, logistical and decarbonization strategy levels. Thus, we forecast a gain of at least +2 pts in the Group's EBITDA margin by 2026E;
- Historically, investors criticized CIMAR for its poorly optimized financial structure through a debt-free balance sheet and a relatively "expensive" financing cost which relies exclusively on Equity. According to our estimates, this transaction would allow CIMAR to increase the debt burden to 40% in its financial structure, leading to a decrease in its average WACC from 9.53% during the period 2021-2024 to 6.84% from 2025;
- CIMAR's profile corresponds to our investment logic which prioritizes the quality of the balance sheet, margin levels, cash generation and low volatility of LT growth. During the period 2024E-2026E, the operator displays a controllable WCR of 9% of revenue, an attractive EBITDA margin of 43.5%, a comfortable OCF(2)/revenue ratio of 28% and a LT growth profile which outperformed GDP.
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