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LafargeHolcim: +23% topline and +760bp gross margin boost Q1 EPS by 98% yoy; raise TP

  • 1Q CY 21 NPAT of BDT1,035mn (EPS: BDT0.89), implying c98% growth yoy
  • Revenue increased by c23% yoy to BDT6,318mn. 1Q 21 GPM stood at 29.7%, up by 760bps yoy
  • Upgrade TP to BDT58, ETR +4.4% and Reiterate HOLD

LHBL BD reported 1Q CY 21 NPAT of BDT1,035mn (EPS: BDT0.89), implying c98% growth against NPAT of BDT523mn (EPS: BDT0.45) in 1Q CY 20. Gross margin expansion (+760 bps yoy) along with lower opex ratio (-90 bps yoy) led the earnings boost.

Revenue increased by c23% to BDT6,318mn which can be attributed to a whopping 16% yoy growth in cement business and additional BDT365mn from the company’s newly added product, Aggregates. Both volume growth and price growth in retail market contributed to LHBL’s higher double digits’ growth in Cement business. According to our market survey, per bag price for Supercrete and Holcim was BDT470-480 in Feb/Mar 2021 against BDT430-440 in Feb/Mar 2020.

1Q 21 GPM stood at 29.7%, up by 760bps yoy. Raw materials cost started to increase from Q3 20 after the nadir in the previous quarter. After a short-lived price slump, cement makers raised retail prices to pass on the increased costs to customers and to recover quickly from the covid brunt. This came as a boon for LHBL as it has its own source of raw materials (clinker).

We upgrade TP from BDT40 to BDT58 (+45% revision), ETR +4.4% and Reiterate HOLD, implying 2021f PE of 18.4x and EV/EBITDA of 13.0x. Based on 2020 performance and quick recovery of cement sales & construction activities, we revised LHBL’s 2021f top-line forecast from BDT19.0bn to BDT21.8bn (+15% revision, BDT19.8bn from LHBL’s cement business and BDT2.04bn from the aggregates business). We expect LHBL to cross the pre-corona top-line level (BDT18bn) in 2021 on the back of higher cement sales (+22% YoY, 11% volume growth and 11% price growth) and rest coming from its aggregates business. Along with that, on the back of expectation of 260bps yoy GPM expansion to 30.5% (vs 2020 GPM of c28%), we revised LHBL’s 2021f bottom-line forecast from BDT2.5bn to BDT3.7bn (+47% revision), which denotes CY 21 expected EPS of BDT3.16, +56% YoY.


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