Adbri will invest $199m over FY21-23 to consolidate its WA cement production into a single state-of-the-art facility. The company expects this will increase annual cement production capacity in WA to 1.5mt from 1.1mt at present.
The company will fund the project from existing debt facilities.
By assuming 35% of the savings are delivered in FY23, with the full benefit seen in FY24, Morgans lifts FY24 earnings (EBITDA) by $19m. The broker also assumes maintenance capex needs moderate by -$15m from FY23 onward.
The Hold rating is maintained and the target price is increased to $3.16 from $2.42.
Target price is $3.16.Current Price is $3.58. Difference: ($0.42) – (brackets indicate current price is over target). If ABC meets the Morgans target it will return approximately -13% (excluding dividends, fees and charges – negative figures indicate an expected loss).