RHI Magnesita is a global leader in refractories. Operating over 30 production and raw materials sites, the group provides high-grade refractory products that are used in industrial high-temperature processes across a wide range of industries, including the steel, energy, and chemicals industries. The company is listed on the London Stock Exchange and currently has a market capitalisation of £1.1 billion.
RHI Magnesita recently advised that it had seen a slowdown in customer activity as a result of Covid-19, particularly in its steel division. It added that the future demand environment was very uncertain. However, the group also advised that it had recently undertaken extensive scenario testing, factoring in a range of potential outcomes, and that it had concluded that it has sufficient liquidity to withstand an extended period of uncertainty. “The business benefits from a strong financial position, with low leverage and significant liquidity, and is well positioned to take advantage of growth opportunities when markets improve," said CEO Stefan Borgas.
RHIM shares have fallen more than 40% over the last three months and we think it’s interesting that four insiders, including Borgas, COO Gerd Schubert, and Chairman Herbert Cordt, have purchased shares recently. Cordt’s purchase on 10 April, in particular, stands out to us as it was worth over £7 million. Overall, these purchases – which represented the largest amount of insider buying in over two years – suggest that insiders are confident that the company has the ability to withstand a downturn, and that they believe the stock is undervalued. Given this buying activity, we think the stock is worth a closer look right now.