Amrize: Too cheap to ignore

Investing.com -- Amrize, recently spun off from Holcim (SIX:HOLN), is trading at levels Bernstein describes as “too cheap to ignore,” initiating coverage with an “outperform” rating and a $62 price target. 

Since its June 23 listing, Amrize has underperformed Holcim by 18% and the S&P 500 by 6%, closing at $50.15 as of July 8. 

This implies a 24% upside and a rerating opportunity from the current 10x 2025 EV/EBITDA to the DCF-implied 11.9x multiple.

The company is the largest cement producer in the U.S. and Canada, with 18 plants and 25 million tons of annual output, 1.7 times that of Cemex. Its inland market exposure shields it from cheaper coastal imports, enabling superior pricing. 

Cement and aggregates prices have risen at 9.4% and 8.2% CAGRs since 2021, respectively. 

Bernstein forecasts Amrize’s 2024-28 sales to grow at a 7.9% CAGR, with 4.3% from pricing alone. EBIT is expected to rise from $2.1 billion in 2024 to $3.9 billion by 2028.

Amrize benefits from low logistics costs due to its access to inland waterways and rail, covering 60% of its transport network. Its largest facility, the St. Genevieve plant, located on the Mississippi River, will reach 5.5 million tons of capacity by H2 2025. Over 100 terminals and 300 storage silos further strengthen distribution efficiency.

Contrary to sector perceptions, Amrize maintains high cost flexibility. Approximately 75% of total costs, around $7 billion in 2024, are outsourced, including logistics and maintenance. Variable costs account for 60% of the total, one of the highest in the sector. This allows Amrize to adjust output and protect margins during demand downturns.

Its building envelope segment, 29% of group sales, is also positioned for growth. Since acquiring Firestone in 2021, Amrize has invested $3 billion in additional acquisitions including Duro-Last and Malarkey. 

Segment EBITDA margins improved from 15% to 23%, with further upside expected. Bernstein forecasts an 8.4% CAGR in building envelope sales through 2028 and 200bps EBIT margin expansion.

The stock’s weakness is attributed to U.S. market softness and initial flowback from dividend, ESG, and Swiss-focused funds. 

Amrize is yet to announce a dividend policy but is expected to align with U.S. peers at a about 1% yield, lower than Holcim’s pre-spin 60%. 

Concerns over ESG and speculation about a Swiss delisting also contributed to selling pressure, which Bernstein believes is now behind.

Amrize is projected to deliver EPS of $3.07 in 2025 and $5.20 in 2028, with adjusted EBITDA margins rising from 27% in 2025 to 31% by 2028. Its valuation, 13.7x 2026 P/E and 13.3x EV/EBIT, remains below U.S. peers such as Vulcan and Martin Marietta. 

With strong fundamentals and pricing power across its portfolio, Bernstein views the current valuation as a compelling entry point.