27 February 2017

CRH

by John Royden

Head of Research

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Price
£27.53
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52 Week High-Low
£30.29-£17.00
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Net Yield
1.92%
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Hist / Pros Per
28.1-21.7
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Equity Market Cap
£23,149m

CRH makes and distributes the heavy materials of construction like cement, aggregates, ready mixed concrete, asphalt/bitumen and lime. On the lighter side its products include clay, insulation and glass. 

CRH are vertically integrated up to the quarry level and take most products as far down the supply chain as they can. Quarries are typically 40 to 50 year projects which drives long term planning. Close to 50% of the business is in the US with the rest mostly spread over Europe. 

If Trump gets his infrastructure plans through Congress then CRH stand to benefit in addition to leverage existing positive momentum in construction. Road repairs are often cited as an easy win for optimising returns as most of the cost goes on improved infrastructure, in contrast to new build projects where brigades of consultants, engineers and lawyers can expropriate much of the value. Lower US corporate tax rates should help earnings growth as well. In addition, there is always the aspiration that fiscal stimulus might find its way onto UK and European political agendas. 

The management are generally admired and their target of 1X leverage by end 2020 is seen as being achievable. 


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