Loma Negra Compania Industrial Argentina SA

LOMA Details

Loma Negra Compania Industrial Argentina SA (NYSE: LOMA) is Argentina's leading cement company focused on producing and distributing cement, masonry cement, aggregates, concrete, and lime for private and public projects. In terms of sales volume, LOMA had a 43.80% market share in Argentina as of December 31, 2020. The company's massive limestone deposits, strategically placed facility, and well-established supply connections provide a robust foundation. The firm has a total limestone resource of around 1,107 million tons, which is expected to last 158 years at the consumption rate as of December 31, 2020. LOMA has 119.21 million American Depository Shares (ADS) listed and outstanding (each ADS representing five ordinary shares).

Share Repurchase Program: On July 02, 2021, the company announced a second share repurchase program, which came into effect on July 06, 2021, and will expire 60 days from the effective date. Under the program, the company can repurchase shares worth up to ARS 975 million, and the maximum price has been capped at ARS 310.00 per ordinary shares and USD 9.00 per ADS.

Robust H1FY21 Results: The company reported a 40.7% increase in net revenues to ARS 28.89 billion during H1FY21 (ended June 30, 2021) compared to ARS 20.54 billion during H1FY20, owing to the sales recovery across all its segments. As a result, net income increased to ARS 1.58 billion during H1FY21 vs. ARS 1.56 billion during H1FY20. As of June 30, 2021, the company's cash balance (including short-term investments) was ARS 2.91 billion, with total debt amounting to ARS 5.73 billion.

Key Risks: Argentina's economy has been characterized by significant instability in recent decades, with high inflation, depreciation of ARS versus USD, and irregular periods of economic development. As a result, economic and political developments affecting the Argentine economy may substantially impact the company's operations. Furthermore, in 2019 and 2020, ARS depreciated by 59.02% and 40.49%, respectively, against the USD. Therefore, if the Peso's devaluation continues, the Argentine economy and the company's operations might suffer significantly.

Outlook: LOMA indicated in its Q2FY21 earnings report that it expects a significant recovery and expansion relative to pre-pandemic levels, as seasonality and public works should begin to contribute constructively. It also stated that a new cement mill and dispatch center would be operational by the end of September 2021.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LOMA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: LOMA's stock price has surged 51.48% in the past twelve months and is currently at the higher end of the 52-week range of USD 3.70 to USD 8.26. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 40.71. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 8.04. Considering the company's strong track record, market dominance, robust balance sheet, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 7.21, up 0.70% as of September 10, 2021, 2:01 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.