A short note to update on Vesuvius and RHI Magnesita, both of which we mentioned in the 24th February blog and both of which announced figures last week.
Vesuvius
This global leader in molten metal flow engineering and technology produced an excellent set of 2022 full-year figures. Revenue grew by 25%, operating and pre-tax profits by 63% and 62% respectively, earnings per share by 60% and cash generation by 224% whilst net debt was reduced by 8%. Market share increases were made across most divisions. The next two years should see strong growth in India paving the way for long-term expansion across Asia.
Following these exceptional figures for 2022 this year should be more of a consolidatory period. However, we would still be looking for earnings per share of around 50p and perhaps a 1p increase in the dividend to 23.25p. At the current price of 430p that puts the shares on an earnings multiple of just 8.6 and an income yield of 5.4%. That looks far too low. A P/E of 11 would still seem quite modest and would point to a price of 550p at which level the yield would still be over 4%.
RHI Magnesita
RHIM is a leading global supplier of high-grade refractory products, systems and solutions. It is Austria based but listed in London. For calendar year 2022 revenues increased by 22%, adjusted EBITA (earnings before interest, tax and amortisation) by 37% and earnings per share by 7%. The company reports in Euros and the dividend was increased by 6.6% to €1.60.
The market actually found these figures very slightly disappointing but, despite significant cost increases in energy, raw materials and freight, margins remained very stable at 11.6% (2021 – 11.7%), indicating RHIM’s price increases have been quickly accepted. The outlook will be negatively affected by less activity in the construction sector but this should be offset, at least in part, by growth in India and new acquisitions. Even if earnings mark time this year the share price of 2645p is surely being overly cautious on an earnings multiple of below 6 times and a yield of 5.6%. A 10% – 20% re-rating would still leave them looking modestly rated.
Both of these stocks are FTSE 250 constituents and are moderately high risk rated.
Russell Dobbs FCSI
Chartered Wealth Manager
