Cematrix price target cut at Beacon

Following the company’s fourth quarter results, Beacon analyst Russell Stanley has cut his price target on Cematrix (Cematrix Stock Quote, Chart, News, Analysts, Financials TSX:CEMX).

On March 26, CEMX reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $1.4-million on revenue of $10.4-million, a topline that was down 47%, year-over-year.

“We are proud of our achievements this year, which represent the second-best financial performance in the Company’s history,” CEO Randy Boomhour said. “The timing of when our scopes of work start within large projects has a material and significant impact on our financial results. These delays are always out of our control. The delayed start of several key projects in 2024 materially impacted our overall results for the year resulting in lower revenues compared to 2023. Despite the lower revenues, we improved margins and reduced costs which help us deliver a strong adjusted EBITDA result for the year. In addition, as a direct result of our strong financial performance, we also generated our best ever positive cashflow from operations for the year.”

Stanley says he is expecting a record year from the company in fiscal 2025, so he explained why he is lowering his price target from $0.55 to $0.35.

“We are reducing our PT to $0.35/sh following the introduction of our F2026 forecast,” the analyst explained. “Last night after the close, CEMX reported Q4 results that beat our revenue/adj EBITDA forecast. Management has predicted F2025 will be a record year, setting up a strong comeback in order to match/exceed F2023 revenue/adj EBITDA of $53M/$4.9M. We have nonetheless reset our F2025 forecast from $65M/$10.1M to $55M/$5.8M, and introduced our F2026 forecast of $69M/$8.4M. Rolling our valuation forward, we now use a 6x F2026 adj EBITDA multiple, which supports the PT reduction from $0.55/sh. Our new PT still represents a potential return-to-target of 79%. The stock trades at 3.1x our F2026 adj EBITDA forecast, representing a 66% discount to the 8.9x average amongst cement producers, and a 59% discount to the 7.4x average amongst infrastructure / engineering companies.”

Stanley ssays margin and cash flow were the silver lining to a disapointgin fiscal 2024.

“Revenue/adj EBITDA declined 34%/33% owing to the delayed start of multiple projects, with those jobs now set for the coming year,” he added. “We would be remiss if we did not call out margins as a silver lining, with gross margins up 434 bps y/y to 27% on revenue mix, as F2024 featured more smaller projects, which are less competitive/higher margin. Operating cash flow after working capital totaled $4.9M, a new company record, and almost 10x the $0.5M produced in F2023. This drove a swing in FCF from negative $1.7M in F2023 to positive $2.8M in F2024.”