Holcim: A Buy Rating Backed by Strong Cash Generation, Decarbonization Leadership, and Strategic Growth Opportunities

Holcim (0QKY – Research Report), the Basic Materials sector company, was revisited by a Wall Street analyst today. Analyst Cedar Ekblom from Morgan Stanley upgraded the rating on the stock to a Buy and gave it a CHF55.00 price target.

Cedar Ekblom has given his Buy rating due to a combination of factors including Holcim’s strong cash generation capabilities, steady earnings growth, and strategic balance sheet management. The company is expected to maintain a free cash flow conversion from EBITDA above 50% through 2030, which is a positive indicator even as capital intensity rises due to growth and decarbonization projects. Holcim’s superior cash generation and consistent earnings growth, driven by a value-over-volume strategy and effective cost control, are anticipated to enhance balance sheet flexibility, allowing for potential mergers and acquisitions or increased cash returns.
Additionally, Holcim’s leadership in decarbonization is seen as a key factor in defending margins and supporting new revenue streams. By approaching decarbonization as a revenue opportunity, Holcim is expected to achieve margin expansion and above-market growth. This approach not only reduces operating and CO2 emission costs but also opens up new revenue streams through pricing premiums for low-carbon products. Despite not being the cheapest option among peers, Holcim presents an attractive investment opportunity with potential upside, particularly in comparison to other Swiss material companies.

In another report released on June 20, Kepler Capital also maintained a Buy rating on the stock with a CHF112.00 price target.

Based on the recent corporate insider activity of 30 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of 0QKY in relation to earlier this year.