Séché Environnement stays on course

While its two big competitors, Veolia and Suez, take center stage, Séché Environnement remains in a form of anonymity. It is true that it is difficult to stand out in front of these two behemoths, even more so when one decides to acquire the other. The stock of this specialist in the recovery and storage of industrial and / or community waste has shown a limited rebound of 25% from its low point in mid-March, following the fall in the markets, and a decline of 6 % since the beginning of the year.

However, his profile has changed a lot in recent years. Séché is now more international. The share of turnover achieved outside our borders amounts to 25%, and the group intends to increase it to 30% by 2022. It is also more refocused on the treatment of hazardous waste, which represents 65% of its activity, knowing that they generate operational profitability greater than that of ordinary waste. Although its debt is high (more than 160% of equity), the group could seize opportunities for external growth if the merger between Veolia and Suez materializes, with many disposals to be expected.

Long-lasting markets

The health crisis had a mixed impact on its performance in the first half of the year. Contributory turnover amounted to 313 million euros, down only 5.1%, while gross operating surplus reached 57.8 million, down 15.4%, which shows a gross operating margin of 17.2% (down 2.1 points). On the other hand, due to high financial expenses, Séché recorded a net loss of 0.9 million euros. For the remainder of the year, Séché’s management is showing measured optimism. While they observe a recovery in activity in France and Europe, they also see a lot of uncertainty in other geographic areas, such as Latin America. As a result, they expect sales for the full year to be below the initial forecast range of 650-700 million euros. Based on these factors, the gross operating margin target was lowered by one point to 19%.

On the other hand, the group remains confident in its ability to meet its commitments by 2022, namely a consolidated turnover of between 750 and 800 million euros, and a gross operating margin of between 21 and 22%.

At the current price, the share capitalizes respectively 26 and 16 times the profit estimates for this year (10.7 million euros) and 2021 (17 million). These levels may seem reasonable, but they do not take into account the resilience of Séché’s activities and the stability of the markets in which the group operates in view of the increased demands of the populations in terms of health and living environment (and regulatory requirements that this entails). In view of its good cash generation, the group could also maintain its dividend (0.95 euros per share), which generates a yield of 2.7%.

Our advice: Buy Séché Environnement at 34 euros to aim for 40 euros. Isin code: FR0000039109.


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