Lafarge: raising price targets

Lafarge: raising price targets
Published: 08 December 2003

Deutsche Bank is raising its target price for Lafarge to Euro 65.0 from Euro
60.5.  On its new target price Lafarge would trade on a 2005E PE of 11.2x,
16 per cent below its 10-year historical average. Given Deutsche Bank's long
standing concerns over Blue Circle and the fact that Lafarge has a blank
cheque in the form of the Euro 1.3bn rights issue from June this year, it
believes that this is discount is warranted.

The investor day at Lafarge's research centre in Lyon revealed no new
financial targets or guidance, says Deutsche. Instead it was quite a
technical presentation explaining how the company plans to further achieve
cost efficiency in its cement operations.

Improving reliability through technical advances, while reducing costs by greater use of alternative fuels
amongst other measures appears to be the main way the company will further improve efficiency.

Following the investor day analysts for Deutsche Bank maintain their FY
2003E forecasts, looking for a 3.1 per cent rise in like for like sales to
Euro 13,558m and for operating profit from ordinary activities to be in line
with the company's  guidance of a stable operating profit excluding currency
movements, in absolute terms down 9.6% to Euro 1,926m.

The main risk to its target price would be further weakness in the US
dollar, overpayment of acquisitions by Lafarge and failure by the company to
improve cost efficiency.