Global infrastructure development and construction activity has increased demand for building materials in both the commercial and residential sectors, creating opportunities for significant growth. Therefore, fundamentally sound industrial stocks CEMEX, S.A.B. de C.V. (CX), Loma Negra Compañía Industrial Argentina Sociedad Anónima (LOMA) and Anhui Conch Cement Company Limited (AHCHY) could be wise portfolio additions. These stocks are currently trading under $15.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the industrial sector.
Industrial production increased by 0.3% in September 2023. Moreover, the Industrial Production Index came in at 103.6 in the United States, and a value of over 100 shows positive production performance.
The global construction materials market is estimated to surge to $1.73 trillion by 2030, exhibiting a CAGR of 3.9%. This expansion can be attributed to a variety of factors, including increased urbanization, infrastructure development initiatives, and rising demand for environmentally friendly building materials. Also, technological advances in the construction industry are likely to boost market growth throughout the period.
The global green building materials market is expected to grow to be approximately $394.41 billion by 2028, at a 9.7% CAGR. Green building materials, such as fiber cement siding, thermally modified wood, bamboo, fly ash, hempcrete, recycled plastic, natural fibers, stucco, stone, and rubber-based materials, are increasingly becoming popular in the residential sector due to their energy efficiency, durability, and ease of maintenance.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Industrial - Building Materials stocks, starting with number 3.
Stock #3: CEMEX, S.A.B. de C.V. (CX)
Based in Mexico, CX produces, distributes, and sells cement, ready-mix concrete, aggregates, clinker, and other construction materials worldwide. The company provides building solutions for housing projects, pavement projects, green building consultancy services, cement trade maritime services, and information technology solutions.
CX’s forward non-GAAP P/E of 10.41x is 26.6% lower than the industry average of 14.18x. Its forward EV/EBIT of 8.22x is 31.4% lower than the industry average of 11.98x.
CX’s trailing-12-month gross profit margin of 32.59% is 14.6% higher than the 28.43% industry average. Its trailing-12-month levered FCF margin of 7.59% is 83.7% higher than the 4.13% industry average.
For its fiscal third quarter that ended September 30, 2023, CX’s net sales increased 15.6% year-over-year to $4.57 billion. Its gross profit stood at $1.56 billion, up 29.5% year-over-year, while operating EBITDA rose 40.2% from the prior-year quarter to $909.82 million.
Analysts expect CX’s revenue to increase 11.7% year-over-year to $17.41 billion for the year ending December 2023. Its EPS is expected to grow 4.3% year-over-year to $0.65 for the same year. Shares of CX has gained 68.5% over the past year to close the last trading session at $6.79.
CX’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CX also has an A grade for Growth and Momentum and a B for Value. It is ranked #8 out of 48 stocks in the A-rated Industrial - Building Materials industry. Click here for the additional POWR Ratings for Stability, Sentiment and Quality for CX.
Stock #2: Loma Negra Compañía Industrial Argentina Sociedad Anónima (LOMA)
LOMA is an Argentina-based vertically integrated company active in the cement industry. It produces and distribute cement, masonry cement, aggregates, concrete, and lime, primarily used in private and public construction, to wholesale distributors, concrete producers, and industrial customers, among others. The Company operates five segments: Cement, masonry cement and lime Argentina, Cement Paraguay, Concrete, Aggregates, Railroad and Others.
LOMA’s forward EV/EBIT of 6.22x is 48.1% lower than the industry average of 11.98x. Its forward EV/EBITDA of 4.98x is 35.8% lower than the industry average of 7.77x.
LOMA’s trailing-12-month ROTC of 7.47% is 33.44% higher than the 5.60% industry average. Its trailing-12-month EBIT margin of 13.87% is 19% higher than the 11.65% industry average.
LOMA’s total current assets came in at MX$76.90 billion ($4.39 billion) for the period that ended June 30, 2023, compared to MX$60.71 billion ($3.46 billion) for the period that ended December 31, 2022. Its total assets came in at MX$319.29 billion ($18.22 billion), compared to MX$305.72 billion ($17.45 billion) for the same period.
The consensus revenue came in at $714.79 million for the fiscal year ending December 2023. Its EPS is expected to grow significantly year-over-year to $0.97 for the same year. LOMA’s shares have gained marginally over the past month to close the last trading session at $6.19.
It’s no surprise that LOMA has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Momentum and a B for Sentiment and Quality. It is ranked #11 in the same industry.
Beyond what is stated above, we’ve also rated LOMA for Growth, Value and Stability. Get all LOMA ratings here.
Stock #1: Anhui Conch Cement Company Limited (AHCHY)
Based in Wuhu, the People's Republic of China, AHCHY together with its subsidiaries, manufactures, sells, and trades in clinker and cement products. The company operates through five segments: Eastern China, Central China, Southern China, Western China, and Overseas.
AHCHY’s forward EV/EBITDA multiple of 3.99 is 48.7% lower than the industry average of 7.77. Its forward EV/EBIT multiple of 5.96% is 50.3% lower than the industry average of 11.98.
AHCHY’s trailing-12-month CAPEX / Sales of 9.74% is 33.3% higher than the industry average of 7.31%, while its trailing-12-month ROTA of 4.82% is 31.7% higher than the industry average of 3.66%.
AHCHY’s total operating income for the quarter ended September 30, 2023, increased 16.1% year-over-year to RMB99.04 billion ($13.60 billion). Its total assets came in at RMB247.07 billion ($33.93 billion) for the period that ended September 30, 2023, compared to RMB243.78 billion ($33.48 billion) for the period that ended December 31, 2022. Its total current liabilities came in at RMB31.06 billion ($4.27 billion), compared to RMB35.57 billion ($4.89 billion) for the same period.
The shares have lost marginally intraday to close the last trading session at $12.21.
AHCHY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #15 in the same industry. It has an A grade for Value and Momentum and a B grade for Stability. To see additional AHCHY’s ratings for Growth, Sentiment and Quality, click here.
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AHCHY shares were trading at $12.10 per share on Wednesday morning, down $0.11 (-0.89%). Year-to-date, AHCHY has declined -24.96%, versus a 15.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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