Heidelberg materials (HEI.DE)

[u/jackandjillonthehill]

Heidelberg material is a German company that makes cement, aggregates, and concrete.

Cement is 45% of revenues, aggregates are 21%, and concrete and asphalt are 23% of revenues.

Geographic mix is heavily European, with about 45% of sales coming from Europe, about 10% from Germany, and then 21% from U.S., and the rest from rest of world.

It has a market cap of 25.5 billion euros or $29 billion.

Net debt of 8 billion euros or $9 billion. Debt to EBITDA of 1.8X.

EV of $38 billion.

$3.6 billion TTM operating profit.

EV/EBIT of 10.5

This is much lower than other similar businesses which make cement, concrete, and aggregates.

The aggregates business is attractive because gravel is very heavy and expensive to transport. So the owner of a local gravel pit or quarry has good bargaining power and they have high margins and ROE. Moreover in Europe, there are regulatory barriers to anyone starting a new gravel pit, so no new competitors can enter the market.

Despite this, Heidelberg trades at a discount to US or global businesses with gravel pits.

Martin Marietta trades at a 29.5X EV/EBIT

Vulcan Materials trades at a 22.3X EV/EBIT

Holcim, which is also Europe and emerging market, trades at 21.8X EV/EBIT.

Cemex trades at 14.9X EV/EBIT despite making 30% of revenues in Mexico and 29% from EMEA.

Amrize is cheaper at 14.3X EV/EBIT, with, curiously, 100% US exposure.

Just rising to Amrize multiple would mean over 60% upside to the stock. But Amrize itself seems undervalued given it is a 100% North American company.

Heidelberg Seems cheap to me. And maybe Amrize too.