美國建筑材料行業(yè)投資策略分析

1、US Construction MaterialsInitiating Coverage of VMC and MLM with OW on larger Aggregates exposure; EXP and SUM at NNorth America Equity Research21 March 2019We are initiating coverage the Construction Materials sector with ratings VMC and MLM as we like their large aggregates exposure that is more e

2、xposed to infra spending, which is growing more than and Non-Res. They are also exposed than peers to states with stronger growth fundamentals. We are also initiating coverage EXP and with N ratings as have lower growth profiles. The sector has performed well this year at +17% average (+4pp vs SPX a

3、nd +5pp vs US MSCI Materials), excluding SUM, which is +42% and is trading at its average historical EV/EBITDA. This report includes extensive analysis on prices, volumes, costs and margins but also on market shareevolution,Americas Construction Materials Adrian E Huerta AC*(52-81) 8152-8720 HYPERLI

4、NK mailto:adrian.huerta adrian.huertaBloomberg JPMA HUERTA Froylan Mendez(52-55) 5540-9482 HYPERLINK mailto:froylan.mendez froylan.mendezJ.P. Morgan Casa de Bolsa, S.A. de C.V.,J.P. Morgan Grupo Financieroanalysis on a per state basis and detailed on theResidential, Non-Res and Infra sectors.Bottom-

5、up viewsWe see prices and accelerating this year. aggregates volumes, while last our sample grew 3.1% (same as for the industry), for this year we it growing 4.9%, outpacing the industrys expected growth 2.4%. For cement vols, last year sample also performed weaker than the industry at+1.4%, impacte

6、d by adverse weather especially in TX, vs +2.2% for the industry while this year expect it to be 0.5pp the industrys +2.2%. prices, aggregates were +2.8% last year the +4% the industry), and we expect +4.8% this year, and on cement expect +2.9% this year +2% last year, which was only 0.3pp below the

7、 industry.Margins should improve this year after disappointing in two. Higher and distribution costs have impacted margins margins -1pp in 2018 and in after posting +2.7pp in 2016, and expect consolidated margins to be +1.2pp this driven stronger pricing momentum and lower increases in cash costs (J

8、PM cement energy cost inflation index could be flattish this year if it remains at current levels as Feb 2019) than lastyear.We expect stronger EBITDA growth vs last year and led by VMC. growth for the sector has decelerated in the past two years. After increasing 18% in 2016, it went to +8% in 2017

9、 and only +3% last year, but expect this year to be +11%, which means a small margin expansion. We expect VMC and MLM to lead the growthEquity Ratings and Price TargetsCompanyTickerMkt Cap ($ mn)Price ($) Rati Curng PrevCur Price TargetEndDateEnd DateVulcan MaterialsVMC US15,233.12115.35OW135.00Dec-

10、19Martin Marietta MaterialsMLM US12,324.46195.76OW225.00Dec-19Eagle MaterialsEXP US3,321.1671.77N85.00Dec-19Summit MaterialsSUM US1,964.6017.07N19.00Dec-19Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change.All prices as of 20 Mar 19.* Registered/qualified as a research analyst u

11、nder NYSE/FINRA rules.See page 237 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest

12、that could affect the objectivity of this report. Investors should consider this report as only a singlefactor in making their investment decision. HYPERLINK / Adrian E Huerta (52-81) 8152-8720 HYPERLINK mailto:adrian.huerta adrian.huertaNorth America Equity Research21 March2019FCF conversion rate e

13、xpected to improve further this year. Last year conversion rate was on average vs 29% in 2017, and we expect it to for this year. Last year, VMCs and MLMs rates increased 26pp and 18pp, respectively, reaching 44%, while the rate was flat for EXP and -13pp forSUM.Top-down viewsTop-down views favor VM

14、C and MLM. VMC is highly exposed to our product, geographic and end-market preferences in the followed MLM among pure players. Meanwhile, geographic footprints CX and Argos are the highest with Tier 1 States while GCC VMC with the highest exposure to the infra/publicsector.We like aggregates over ce

15、ment and RM for the following reasons: (1) LT growth prospects as aggregates players are more exposed to the public sector. In the last 3 quarters, aggregates volumes were growing the growth in cement vols. (2) More inelastic demand with prices +4% in a 7-year CAGR vs for volumes, while for cement +

16、4% on prices vs +4.5% on volumes. And (3) margins and operating leverage, on the cost side less exposed to energy prices and a higher percentage of fix costs driving a 50-60% operatingleverage.Infra (public) sector growth accelerating and has outperformed the rest. After several years declines, it w

17、as +7% in 2018, and expect it to grow driven efforts from state and local governments to increase infra funding. We believe that chances are high a formal discussion a new infrastructure plan to be finally addressed. Our base-case scenario is not based the approval a new infrastructure plan but assu

18、mes positive momentum from projectbacklog.Demand from the sector has likely reached a peak but likely still growing at a low-single-digit pace the next couple years while the recent slowdown has mostly been explained higher interest rates, but there downside risks. Cement is more exposed to than agg

19、. Non-residential should keep slowing in 2019 driven by key cement/aggregates intensive segments, and we see no clear inflection point yet Jans m/m gains and we believe y/y growth could remain in the +2-3% range vs +5% lastyear.Strong demand in the “Sunbelt” region with key cement & aggregates consu

20、ming states expected to see +40% population growth by 2040 (2% per and cement and aggregates demand still peak levels. CX, Argos, and MLM are exposed to the most attractive geographical regions among players given a large exposure to classify as tier 1 states Florida, andTexas).Table of Contents HYP

21、ERLINK l _bookmark0 ExecutiveSummary6 HYPERLINK l _bookmark1 Bottom-upviews7 HYPERLINK l _bookmark2 Top-downviews8 HYPERLINK l _bookmark3 SectorRisks9 HYPERLINK l _bookmark4 Key Themes11 HYPERLINK l _bookmark5 Top-down views favor VLMand11 HYPERLINK l _bookmark6 We like aggregates over cementandRM12

22、 HYPERLINK l _bookmark7 Geographic exposure is important; CX, Argos, MLM and VMC more exposed to Tier1states13 HYPERLINK l _bookmark8 Infra could surprise positively, and downsideriskslimited15 HYPERLINK l _bookmark9 Margins should improve this year after disappointing in pasttwoyears19 HYPERLINK l

23、_bookmark10 . . . driving stronger EBITDA growth vs last year and ledbyVMC22 HYPERLINK l _bookmark11 Volumes, larger LT upsideonaggregates24 HYPERLINK l _bookmark12 Aggregates prices grow more consistentlythancement27 HYPERLINK l _bookmark13 EXP generates the highest ROIC, explained by its wallboard

24、 business, but is declining while for therestincreasing30 HYPERLINK l _bookmark14 Growth capex and acquisitions; VMCs investment yields are 2-3x morethanpeers30 HYPERLINK l _bookmark15 Return of cash through buybacksshouldcontinue32 HYPERLINK l _bookmark16 FCF conversion rate expected to improve fur

25、therthisyear33 HYPERLINK l _bookmark17 Favor Aggregates over CementandRM37 HYPERLINK l _bookmark18 Aggregates more exposed to Public Construction, our favoredendmarket39 HYPERLINK l _bookmark19 Demand is highly correlated among Cement and Aggregates and both belowpeak40 HYPERLINK l _bookmark20 Simil

26、ar pricing trends for Agg and Cement but more defensive for Agg, which allows forhighermargins41 HYPERLINK l _bookmark21 Aggregates could grow stronger than Cement as most players at full capacity and imports will playarole44 HYPERLINK l _bookmark22 Cement imports profitability dependent onfouritems

27、45 HYPERLINK l _bookmark23 Energy costs: RM/Aggregates less exposed to fuel volatility than Cement but key inputs have startedtodecline49 HYPERLINK l _bookmark24 Aggregates have highentrybarriers54 HYPERLINK l _bookmark25 The 2020 IMO regulation could drive lower cash cement costs while pushing high

28、er importedcementcosts57 HYPERLINK l _bookmark26 What are Aggregates, cementandRM?61 HYPERLINK l _bookmark27 Residential growth slowing after a long recovery. CX, EAG & SUMmostexposed63 HYPERLINK l _bookmark28 Housing sentiment recovering after a weak 2H18, but not yet showninpermits65 HYPERLINK l _

29、bookmark29 EXP, CX and MLM have the largest exposure to states with housing permits above thenationalaverage68 HYPERLINK l _bookmark30 Household formation has beengainingmomentum69 HYPERLINK l _bookmark31 Housing inventory well below historical averageat1.8mn71 HYPERLINK l _bookmark32 Strong afforda

30、bility compensates highermortgage rates71 HYPERLINK l _bookmark33 Home improvement as a share of consumers wallet hasbeenrecovering76 HYPERLINK l _bookmark34 Infra starting to recover despite lack of plan Vulcan, GCC & MLMmostexposed79 HYPERLINK l _bookmark35 Strong momentum led by aggregates & ceme

31、nt intensive segments within publicconstructionspending80 HYPERLINK l _bookmark36 Vulcan, MLM and GCC with the largest exposuretoinfrastructure81 HYPERLINK l _bookmark37 Public spending with large roomtogrow81 HYPERLINK l _bookmark38 . . . andisrecovering85 HYPERLINK l _bookmark39 Recovery driven by

32、 state & localgovtinvestments88 HYPERLINK l _bookmark40 . . . by solving their infrastructure deficit ontheirown90 HYPERLINK l _bookmark41 Federalgovernmentprograms93 HYPERLINK l _bookmark42 Non-residential to keep slowing down in 2019 SUM & MLM themostexposed98 HYPERLINK l _bookmark43 All states ar

33、e different105 HYPERLINK l _bookmark44 Demand in most states below peak levels, but “Sunbelt” region with most promising outlookandmomentum105 HYPERLINK l _bookmark45 Mid-term demand outlook favorsSunbeltregion108 HYPERLINK l _bookmark46 Among pure US players: Key exposure to CA and TX drives outper

34、formance in Vulcan and MLM regions vs.theUS110 HYPERLINK l _bookmark47 Valuation118 HYPERLINK l _bookmark48 Summit mostshortedname124 HYPERLINK l _bookmark49 Cyclical stocks within a cyclical sector. but some more than others; SUM/EXP are more cyclicalthanVMC/MLM125 HYPERLINK l _bookmark51 VulcanMat

35、erials128 HYPERLINK l _bookmark50 Well positioned to continue growing EBITDA above peers that warrants its premium valuation; InitiateatOW128 HYPERLINK l _bookmark52 InvestmentThesis128 HYPERLINK l _bookmark53 Risks to Rating andPriceTarget129 HYPERLINK l _bookmark54 Highest exposure to aggregatesam

36、ongpeers130 HYPERLINK l _bookmark55 while infrastructure sector is its largestendmarket130 HYPERLINK l _bookmark56 Key exposure to California, Texas and Georgia where it has integrated RM andAsphaltoperations131 HYPERLINK l _bookmark57 EBITDA growthabove peers132 HYPERLINK l _bookmark58 . . . driven

37、 by top line but also frommarginexpansion132 HYPERLINK l _bookmark59 Unit profitability on Agg is the highestamongpeers134 HYPERLINK l _bookmark60 FCF generation is strong at 37%ofEBITDA135 HYPERLINK l _bookmark61 . . . and has large cash returnstoshareholders136 HYPERLINK l _bookmark62 Disciplined

38、Leverage atonly2x137 HYPERLINK l _bookmark63 Vulcan 137 HYPERLINK l _bookmark65 Martin Marietta143 HYPERLINK l _bookmark64 Best geographic mix with room to surprise on market share recovering and pricing; InitiateatOW143 HYPERLINK l _bookmark66 InvestmentThesis143 HYPERLINK l _bookmark67 Risks to Ra

39、ting andPriceTarget144 HYPERLINK l _bookmark68 EBITDA growth at +11%thisyear145 HYPERLINK l _bookmark69 . . . driven byhighermargins145 HYPERLINK l _bookmark70 . . . and with cement vols +2% andaggregates+6%146 HYPERLINK l _bookmark71 Aggregates per ton gross profit +72% (2017 vs 2014) but downlasty

40、ear146 HYPERLINK l _bookmark72 Strong FCF generation reaching 44% of EBITDAin2018149 HYPERLINK l _bookmark73 Large cash returnstoshareholders149 HYPERLINK l _bookmark74 With room to continuedoingM&A150 HYPERLINK l _bookmark75 A leading aggregates-led company intheUS152 HYPERLINK l _bookmark76 . . .

41、looking to grow furtherincement153 HYPERLINK l _bookmark77 Top 5 markets make 70% of sales with 38% comingfromTX153 HYPERLINK l _bookmark78 MLMbusinesses154 HYPERLINK l _bookmark80 Eagle Materials162 HYPERLINK l _bookmark79 Low leverage, ample cash returned to shareholders but limited potential; Ini

42、tiateatN162 HYPERLINK l _bookmark81 InvestmentThesis162 HYPERLINK l _bookmark82 Risks to Rating andPriceTarget163 HYPERLINK l _bookmark83 EXPs capital structure astrategicpositive164 HYPERLINK l _bookmark84 Lean management focusedonROE165 HYPERLINK l _bookmark85 EBITDA growth has been relatively fla

43、t in past two yearsexcludingacquisitions.166 HYPERLINK l _bookmark86 Cement accounts for 45%ofEBITDA167 HYPERLINK l _bookmark87 . . . & wallboardfor40%169 HYPERLINK l _bookmark88 Oil & Gas business with large upside but couldtaketime171 HYPERLINK l _bookmark89 EXPbusinesses172 HYPERLINK l _bookmark9

44、1 SummitMaterials181 HYPERLINK l _bookmark90 Building an empire has its costs; Initiate at N onhighleverage181 HYPERLINK l _bookmark92 InvestmentThesis181 HYPERLINK l _bookmark93 Risks to Rating andPriceTarget182 HYPERLINK l _bookmark94 Growth has come from largeM&Ainvestments183 HYPERLINK l _bookma

45、rk95 But should not do acquisitions yet givenhighleverage.183 HYPERLINK l _bookmark96 . . . and a low valueshareprice184 HYPERLINK l _bookmark97 Aggregates is 36% ofgrossprofits184 HYPERLINK l _bookmark98 with large exposure to Texas, Utah, KansasandMissouri185 HYPERLINK l _bookmark99 FCF should imp

46、rove on lower capex andEBITDAgrowth189 HYPERLINK l _bookmark100 2018 was weak with EBITDA -7%despiteacquisitions.190 HYPERLINK l _bookmark101 . . . but guiding for 6-16% EBITDA growththisyear191 HYPERLINK l _bookmark102 Summit businesses192 HYPERLINK l _bookmark103 Appendix State details199 HYPERLIN

47、K l _bookmark104 VulcanMaterials225 HYPERLINK l _bookmark105 Martin Marietta Materials228 HYPERLINK l _bookmark106 Eagle Materials231 HYPERLINK l _bookmark107 SummitMaterials234We acknowledge the key contribution to this report from Emilio Bailon of Banco J.P Morgan S.A.Figure 1: EBITDA marginsExecu

48、tive Summary32.3%31.6%20182019e33.6%31.9%We initiate coverage of VMC with an OW and a Dec-19 price target of $135, which is based on a fwd EV/EBITDA multiple of 14.5x, in line with its 5YR average. The company has a large 90% exposure to Agg, which we favor over cement, and it has a leading position

49、 in most of its regions. We like the companys28.4%27.7%VMCMLMEXP22.0%21.3%SUMdiscipline to return cash to shareholders, its clear strategy and low leverage, its attractive and efficient asset portfolio and its attractive returns on investments that justify its premium valuation vs peers. This stock

50、should strongly benefit from positive news on infrastructure investments, and last year it posted the highestSource: J.P. Morgan.Table 1: Prices and vols 171819eAggregatesSamplevols*0.3%3.1%4.9%USvols-2.0%2.9%3.6%Sampleprice*4.0%2.8%4.8% USprices3.9%4.0%-CementSample vols*2.8%1.4%2.7%US vols2.4%2.2%

51、2.3%Sample price*4.2%2.0%2.9% USprices4.3%2.3%- Source: J.P. Morgan. *averageFigure 2: EBITDA growthEBITDA growth among peers and we expect that to happen again this year.We initiate coverage of MLM with an OW rating and a Dec-19 price target of$225, which is based on a fwd EV/EBITDA multiple of 12.

52、6x, mostly in line with its historical average. We like the companys high exposure to aggregates, and it should benefit this year from its high exposure to TX that was severely impacted last year by adverse weather conditions. We expect the company to continue being disciplined on acquisitions as it

53、 has room on its balance sheet to continue investing, but we also expect it to continue returning cash to shareholders.We initiate coverage of EXP with a N rating and a Dec-19 price target of $85, which implies a fwd EV/EBITDA multiple of 8.4x. EXP has the largest exposure to cement (operating at fu

54、ll capacity) vs peers at 45% of EBITDA, while its second largest segment is gypsum wallboard with 40% that is heavily linked to Res and remodeling. Thus, it has the highest exposure to the Residential sector at 50% for15% 11%20182019e11%which we see less attractive growth versus the public sector. W

55、e see limited M&A opportunities in cement, but EXP could add on to its aggregates exposures that are9%-3%-7%small (only 3.4 mt sold last year vs 170-200 mt for MLM and VMC and 48 mt for SUM). With EBITDA relatively flattish in the past few years, we believe the company will continue to return a larg

56、e amount of cash to shareholders.We initiate coverage of SUM with a N rating and a Dec-19 price target of $19,which implies a fwd multiple of 8.5x vs a 9.1x historical average. We like theVMC MLMEXPSUMSource: Company reports and J.P. Morgan estimates.56%46%56%46%37%26%60%50%40%30%20%10%0%companys pr

57、oduct mix and end market exposure more than EXPs, but its geographic mix is a bit weaker than VMCs and MLMs. EBITDA was -13% on an l-t-l basis last year driven by lower cement volumes and flat on aggregates but also from weak prices driving down consolidated margins, and SUM is now guiding for 6-16%

58、 growth in 19 (JPMe +11%), which seems challenging. With leverage being the highest among peers, it seems difficult to fund large acquisitions and should focus on enhancing EBITDA and especially FCF that is running at a low 26% FY19 conversion rate (13% in FY18) despite minimal cash taxes and is bel

59、ow peers.VMC MLM EXP SUM CXArgos GCCVMC MLM EXP SUM CXArgos GCC23.821.422.118.813.912.926.011.21301415126352414.514.012.512.76.85.921%15%11%6%64%-2%43%135225851986500150115.3197.873.517.64.96,600105N N N PTDec-19 PTCurr priceJPMRatingVMC MLMEXPSUMEV

60、/ EBITDAP / E3M ADTV20182019eSource: J.P. Morgan estimates. As a % of EBITDAupside19e20e19e20e$mnSource: J.P. Morgan.Bottom-up viewsMargins should improve this year after disappointing in the past two years. Higher energy and distribution costs have impacted margins in the past two years with EBITDA