CRH CRH plc
Cyclical materials leader at peak margins; fairly valued, no margin of safety.
The story
CRH is a leading construction materials aggregator, heavily North American after its US listing and AmLego acquisition. Margins have expanded to ~15.5% on pricing power and mix shift, but this is a cyclical, capital-intensive business where sustained margins above 16% would be optimistic. Growth is decelerating toward mid-single digits as infrastructure tailwinds normalize.
Trimmed Y1 growth from 7% to 6% as 5y CAGR of 4.6% and recent revenue trajectory suggest cooling momentum. Lowered target margin from 16% to 15.5% — TTM margin is 15.5% and cyclical materials rarely sustain peaks above that. Terminal growth nudged to 3.5% (below risk-free 4.78%) reflecting long-run infrastructure needs. Sales-to-capital held at 0.93 matching observed levels; this is a capital-heavy business with limited efficiency upside.
Value drivers
| Revenue growth (Y1) | 6.0% |
| Terminal growth | 3.5% |
| Forecast horizon | 7y |
| Target operating margin | 15.5% |
| Years to target margin | 5 |
| Sales-to-capital | 0.93 |
| Beta | 1.15 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 8.9% |
| Terminal WACC | 8.4% |
Valuation bridge
| PV of explicit FCFF | 17.01B |
| PV of terminal value | 52.44B |
| Equity value | 53.87B |
| ÷ shares → per share | $80.98 |
News
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Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 40.95B | 6.0% | 15.5% | 4.97B | 2.49B | 2.48B | 2.28B |
| 2 | 43.24B | 5.6% | 15.5% | 5.25B | 2.46B | 2.79B | 2.35B |
| 3 | 45.47B | 5.2% | 15.5% | 5.52B | 2.40B | 3.12B | 2.42B |
| 4 | 47.63B | 4.8% | 15.5% | 5.78B | 2.32B | 3.46B | 2.46B |
| 5 | 49.69B | 4.3% | 15.5% | 6.03B | 2.22B | 3.81B | 2.49B |
| 6 | 51.64B | 3.9% | 15.5% | 6.27B | 2.09B | 4.18B | 2.51B |
| 7 | 53.45B | 3.5% | 15.5% | 6.49B | 1.94B | 4.55B | 2.50B |
Key risks
- Cyclical downturn in non-residential and infrastructure spending
- Rising energy and input costs compressing margins from current peak
- Interest rate sensitivity on $19.7B debt burden
Catalysts
- Continued US infrastructure bill deployment accelerating volumes
- Further bolt-on M&A consolidating fragmented aggregates markets