James Hardie Industries PLC

North America Underlines Growth: James Hardie Industries Plc (ASX: JHX) has recently announced the appointment of the new CEO Dr Jack Truong, currently the Company’s President. Truong would replace long – standing CEO Louis Gries. In the 1Q FY19, the company posted higher net adjusted profit of US$79.9 Million, an increase of 29% pcp. North America Fiber cement segment witnessed significant growth in volume at 5% compared to pcp. Net sales from the Fiber cement segment (North America) came in at US$422.8 Million, an increase of 10% compared to pcp.

The management expects the Full year adjusted Net operating Profit between US$300 Million and US$ 340 Million. United States would play a significant role in company’s realizing the expected profit. However, uncertain market conditions and volatile input costs could hamper the profit going forward.

Stock Performance: The stock has generated negative Year to date return of 4.45%. The company is trading at the PE of 49.90x, expensive than most of its peers. Further, the cautious tone of JHX over North America business might be another reason for the investors remaining sideways. Going forward, the stock price has discounted the recent positive information about the company that does not have much room to grow Northwards. Expecting a short-term correction in the price, we put an ‘Expensive’ recommendation on the stock at the current market price of $21.230.

Reliance Worldwide Corporation 

Over Dependence on U.S.A: Reliance Worldwide Corporation Limited (ASX: RWC) has recently been added to the S&P/ASX 100 Index, effective at the open on September 24, 2018. FY18 has been a good year for the company with double digit growth in revenue and earnings. Net sales came in at $769.4 Mn, up 28% compared to pcp. Higher revenue was driven by double digit growth in core SharkBite Push-To-Connect fittings and accessories, first full year inclusion of Holdrite and addition of one month of John Guest sales.

Sales Growth (Source: Company Reports)

During the year, sales growth in the new construction markets was witnessed, and this led in the Americas by the inclusion of Holdrite products and EvoPex. The double-digit sales growth witnessed in America was after excluding one-time benefits from product rollout to Lowe’s store in the United States in the first half and higher sales during the winters in the States. Since United States is core to the growth story of RWC, we believe that new import duties might have adverse impact on annual results.

Stock Performance: The stock has generated stellar YTD returns for the shareholders at 47.50%. However, at current juncture, in the wake of U.S. tariff duty, the company might witness margin decline and slow growth. We therefore put an ‘Expensive’ recommendation on the stock at the current market price of $5.470 (price to earnings ratio of 45.12x).
 

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