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Numis downgrades CRH to ‘hold’ following building group’s strategy moves

“With CRH’s share price now only marginally below our 2870p target price, we move our recommendation from Add to Hold,” the analysts said

construction worker on site
CRH said it would establish a new global Building Products division effective from 1 January 2019

City broker Numis has downgraded CRH PLC (LON:CRH) to ‘hold’ from ‘add’, after world’s third largest building group said last week it would establish a new global Building Products division effective from 1 January 2019.

In a note to clients, analysts at Numis said that in response to the weak share price, CRH’s management announced a €1bn share buyback programme and a number of business improvement initiatives, which lead to a 20% increase in CRH’s share price from its lows.

READ: CRH up as it looks to boost margins by combining businesses to create new building products division

 “With CRH’s share price now only marginally below our 2870p target price, we move our recommendation from Add to Hold,” the analysts said.

The analysts added that CRH’s management is now targeting a 300bps improvement in CRH’s EBITDA margin by 2021, and they estimate that around half of this progression will be driven by organic growth and operating leverage.

 “We believe that the remaining targeted margin growth will be achieved through the divestment of lower margin businesses, such as Europe Distribution,” the analysts concluded.

In morning trading, CRH's shares rose 0.47% to 2,798.0p.

 

 

 

Quick facts: CRH PLC

Price: 2990 GBX

LSE:CRH
Market: LSE
Market Cap: £23.61 billion
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