Loma Negra Compania Industrial Argentina SA

LOMA Details

Loma Negra Compania Industrial Argentina SA (NYSE: LOMA) is Argentina's leading cement manufacturer and distributor. LOMA is engaged in producing and distributing cement, masonry cement, aggregates, concrete, and lime for private and public projects. At the present consumption rate in FY20, the firm's entire limestone resource is estimated to be roughly 1,107 million tons. LOMA has 119.21 million American Depository Shares (ADS) listed and outstanding (each ADS representing five common shares).

Latest News:

• Share Repurchase Program: On September 24, 2021, LOMA approved its third share repurchase program. It plans to invest up to ARS 700 million or repurchase up to 10% of its capital stock, whichever is lower. The proposal went into effect on September 28, 2021. Further details of the program have been mentioned below

Buyback Summary (Source: Form 6-K, November 12, 2021)

9MFY21 Results:

• Improvement in Revenues: LOMA's net revenues increased by 27.10% to ARS 49.37 billion during 9MFY21 (ended September 30, 2021), compared to ARS 38.84 billion during 9MFY20, driven by the recovery of the concrete segment, the growth in cement and the recovery of the railway and aggregates segment
• Decline in Net Income: During 9MFY21, the company had a net income of ARS 3.22 billion, compared to ARS 11.54 billion during 9MFY20.
• Healthy Balance Sheet: As of September 30, 2021, the company had a cash balance (including short term investments) of ARS 4.29 billion with outstanding debt of ARS 4.28 billion.

Key Risks:

• County Risk: In recent decades, Argentina's economy has been marked by severe instability, with high inflation, devaluation of the Argentine Peso against the US dollar, and periods of unequal economic improvement. As a result, changes in the Argentine economy and politics could impact the company's operations.
• Currency Fluctuation Risk: The Argentine peso (ARS) declined by 59.02% and 40.49% against the US dollar in FY19 and FY20, respectively. Therefore, the Argentine economy and the company's activities could suffer considerably if the ARS dramatic depreciation persists.

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 fallen 20.75% in the past three months and is currently leaning towards the lower band of its  52-week range of USD 5.00 to USD 8.26. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 37.60. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 7.50.

Considering the company's proven track record, market dominance, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 6.11, up 0.49% as of December 01, 2021, 2:17 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.