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GBP1,448m
Research: Industrials
SigmaRoc (SRC) continues to benefit from resilient demand in both the industrial mineral and construction markets, a continuing trend which, based on FY22 consensus, will see adjusted pro-forma EBITDA growth of 19% pa since the IPO in 2017, as calculated by the company. Q322 like-for-like revenue growth was 19%, to £394m, and despite rising input prices the EBITDA margin was 19.5%, ahead of management’s expectations. The group trades on an FY22e P/E of 7.0x, at a comfortable discount to its prospective average of c 11x over the past five years.
SigmaRoc |
Solid Q322 results despite market headwinds
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Industrials |
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31 October 2022 |
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SigmaRoc (SRC) continues to benefit from resilient demand in both the industrial mineral and construction markets, a continuing trend which, based on FY22 consensus, will see adjusted pro-forma EBITDA growth of 19% pa since the IPO in 2017, as calculated by the company. Q322 like-for-like revenue growth was 19%, to £394m, and despite rising input prices the EBITDA margin was 19.5%, ahead of management’s expectations. The group trades on an FY22e P/E of 7.0x, at a comfortable discount to its prospective average of c 11x over the past five years.
Building on solid foundations
SRC continues to consolidate in the sector, combating the ongoing energy cost inflation and geopolitical uncertainty through selective price increases and efficiency gains. Volume growth for the first nine months of the year was 2% and Q322 revenue rose 19% on a like-for-like basis, to £394m, benefiting from its geographical and product diversification. The industrial mineral markets contributed 41% of group revenue, with robust demand notably seen in the environmental, agricultural and chemical segment (18% of group revenue). A total of 57% of group revenue stemmed from construction markets, over half of which was from infrastructure applications. Underlying EBITDA grew by 5% like-for-like to £77m, a margin of 19.5%.
Room for growth despite economic challenges
In Q322 SRC deployed c £56m of growth investment consisting of both organic expansion and acquisition, which has the potential to significantly drive earnings enhancement. This included the execution of a new organisational structure at Nordkalk, including a separate quicklime division and two new geographical regions, which will enable SRC to further penetrate the Baltic markets and consolidate its carbonates business. In Guernsey, Ronez has received planning permission to develop a greenfield quarry, which will allow production capabilities to last the next 20 years. In Q4 we expect SRC to focus on consolidation, cash generation and deleveraging. The board is confident in delivering the group’s FY22 expectations despite the current macroeconomic uncertainty.
Valuation: Still well below peers
SRC trades on a P/E of 7.0x, a comfortable discount to its average of c 11x over the past five years. It is at the lower end of a peer group of companies with similar exposures, which average a P/E of 9.0x. Since inception, SRC has had minimal net debt with a history of paying it down quickly. Net debt/EBITDA of 2.2x at June 2022 remains comfortably below the covenant limit of 3.25x and analyst consensus expects leverage to fall to 1.5x by FY23.
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Consensus estimates
Source: Company reports, Refinitiv |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Healthcare
Incannex Healthcare’s Q123 cash flow report highlighted two key developments in the company’s drug pipeline, including positive preliminary safety data from the Phase 1 clinical trial of IHL-675A (an anti-inflammatory drug) and a constructive pre-investigational new drug (IND) meeting with the FDA for IHL-216A, an inhaled drug product for the treatment of traumatic brain injury (TBI). With the APIRx acquisition adding 22 drug development projects (both pre-clinical and clinical) to its portfolio, the company now boasts a broad pipeline, with discussions ongoing with the Monash University to strengthen its pipeline further. With a cash balance of A$33.4m (US$21.4m) at end-Q123, Incannex is well placed to fund its operations into FY24 and its recent inclusion in Standard and Poor’s ASX 300 Index should further enhance visibility. Our valuation remains unchanged at US$714.7m or US$11.74 per ADR.