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Company Overview: James Hardie Industries PLC (ASX: JHX) is one of the largest producers and marketers of high-performance fiber cement siding and backerboard. The company has four operating segments, namely, (1) North America Fiber Cement, (2) Europe Building Products, (3) Asia Pacific Fiber Cement and (4) Research and Development. The company was listed on ASX in October 2001.
JHX Details
This report is an updated version of the report published on 26 April 2022 at 3:18 PM GMT.
Strategic Initiatives & Sales Momentum to Aid JHX: JHX remains on track with its strategic initiatives for FY22 & beyond, which include selling directly to homeowners in order to hasten demand creation, and drive profitable growth in existing and new segments, as well as commercialise worldwide innovations by escalating into new categories.
Financial Trend; Analysis by Kalkine Group
3QFY22 Results Highlights: The company has delivered a robust Price/Mix growth in North America (up +12%), Europe (up +13%) and the Asia Pacific (up +11%), which has led to exceptional growth in 3QFY22.
Key Segmental Highlights; Analysis by Kalkine Group
Key Metrics: The company reported a gross margin of 35.8% in 3QFY22, compared to the industry median of 34.6%. The net margin stood at 15.0% during the same period, compared to the industry median of 13.4%.
Profitability Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders together form around 42.06% of the total shareholding, while the top 4 constitute the maximum holding. AustralianSuper and Pinnacle Investment Management Group Ltd are holding a maximum stake in the company at 6.97% and 5.38%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis:
Outlook: The company remains on track to make continuous progress on its global strategy across all three regions. Considering positive expectations for continued residential and market growth in the USA, JHX has upped its guidance for FY22. It now expects adjusted net income to be in the range of US$620 million and US$630 million, up from the prior view of US$605 million and US$625 million and compared to US$458 million reported in FY21. Further, the company has provided FY23 adjusted net income guidance between US$740 million to US$820 million. The company is offering high-value products with this growth momentum, thus penetrating new and existing markets.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The company’s stock went down by ~21.59% in the past six months. Currently, the stock is trading slightly below the average of its 52-week high and low levels of $58.07 and $39.49, respectively. The stock has been valued using the P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some premium as compared to its peers, considering growth in the U.S. residential market and across all three regions, decent fundaments, robust cash flow, etc. For the purpose of valuation, peers such as Boral Ltd (ASX: BLD), Adbri Ltd (ASX: ABC), and Wagners Holding Company Ltd (ASX: WGN) have been considered. Taking into account the above-mentioned factors, robust top and bottom-line growth, geographical expansion, raised guidance for FY22, indicative upside in valuation, and current trading level, we recommend a ‘Buy’ rating on the stock at the current market price of $41.02, as on 26 April 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
JHX Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined:-
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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