Hi,Interesting to see that this stocks trades exactly at the...

Hi,

Interesting to see that this stocks trades exactly at the same valuation than in Oct 20 (cf first post in this threat), with an EV/trading EBITDA of 3.6 x.
So all the rebound of the stock since then is only due to the EPS and there has not been any re-rating of the stock.

The low rating of the stock is probably due to 2 main elements :
- the large cyclicity of its business,
- but also the strong pressure from imports.

The cyclicity of the sector has not changed much, as demand remains very cyclical (large exposure to residential and commercial construction). Good thing is probably that there is a good supply discipline as local operators do not seem to increase capacity and prefer consolidation*.
The key question remains about imports. Difficult to say if the recent weakening of imports is only due to import supply disruptions with covid. Going forward, the requirement for higher standards in construction can explain a lower exposure to imports, even if it probably means higher cost for construction. Interesting to note that Capral has now been talking about gains of market share against imports and import supply disruption since the beginning of FY 20. During H1 21, they estimated that price and mix improvement had a positive impact of 1.5 m on their trading EBITDA.

Based on their last guidance (16/12/21), they expect an increase of 53 % for their trading EBITDA** H2 21 (which was already a high basis of comparison).
Find it quite strong for 2 reasons :
- increase of aluminium prices during that period,
- Capral was almost working at full capacity in H2 20, so I suspect that most of EBITDA increase for H2 21 is not coming from higher volume and lower costs (Bremer restructuring gains largely reflected in FY 20 results), but from better pricing.

* cf recent acquisition of competitor's capacity by Capral.
** trading EBITDA did not include the impact of jobkeeper.