Sébastien Lemonnier presented his in-depth investment thesis on Imerys (France: NK) at European Investing Summit 2014.

Imerys: global leader in mineral processing and owner of quarries with 20+ years of reserves on average (barrier to entry). Four main product lines: 1) functional additives (e.g. added to customer’s products to achieve shock absorption and lightness); 2) mineral components (e.g. used for product whiteness and strength); 3) process enablers (e.g. refractories for industrial equipment); and 4) finished products (e.g. clay tiles for housing). Strong market position with #1 or #2 share in each niche. No end market represents more than 15% of sales. The shares are mispriced as the market considers it a cyclical company (however, 40% of sales are generated in industries like food and beverage, cosmetics, and similar), and ignores large structural growth opportunities (e.g. propane business benefiting from shale gas growth, ceramic minerals to substitute some steel parts within cars, etc.). The consensus is also too cautious on future margins, which should benefit from pricing power and higher margin growth areas. Finally, the market still views management as too cautious in terms of use of cash. Lemonnier thinks management is disciplined and well incentivized. Imerys often gets lumped with construction companies, but should be compared to industrial/specialty chemicals companies; it offers an attractive risk/reward with limited downside and 30-35% upside in 2-3 years.

About the instructor:

Sébastien joined Mansartis, the Paris-based family-run financial services group, in 2014 after 10 years of experience in European equities, both as financial analyst and since 2006 as fund manager. Before joining Mansartis, Sébastien had been managing the Tocqueville Value Europe fund. Sébastien holds a Masters Degree in Financial Management from Panthéon-Sorbonne Paris.

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