This report is an updated version of the report published on 30 May 2022 at 3:15 PM (GMT +10)
James Hardie Industries PLC
JHX Details
James Hardie Industries PLC (ASX: JHX) is the world’s largest producer and marketer of high-performance fiber cement siding and backerboard. The company is also a market leader in Europe for fiber gypsum products.
Results Performance for the Year Ended 31 March 2022 – FY22
- Net sales stood at US$3,614.7 million in FY22, up 24% YoY, led by Price/Mix growth of 10% because of value product mix and volume growth of 14%.
- Adjusted EBIT stood at US$815.6 million in FY22, up 30% YoY, and an adjusted EBIT margin of 22.6%.
- EBIT stood at US$682.6 million in FY22, up 44% YoY and an EBIT margin of 18.9%.
- The focus on a high-value product mix and the continued execution of LEAN facilitated the company in absorbing input cost pressures in FY22 while investing phenomenally in marketing and innovation, which resulted in a rise in SG&A of 18%.
Source: Company Reports, Analysis by Kalkine Group
Recent Update
- On 18 May 2022, the company released the FY22 annual report where it stated that revenue from North America stood at US$2,551.3 million, up 25% YoY, and Adjusted EBIT stood at US$741.2 million, up 26% YoY.
Outlook
The company’s strategic initiatives for the next 3-year remain unchanged, and the management is focused on executing these strategies, which include:
- Marketing directly to homeowners to accelerate demand creation.
- Penetrating and driving profitable growth in existing and new segments, especially Repair and Remodel.
- Commercializing global innovations by expanding into new categories.
The company anticipates FY23 adjusted net income in the range of US$740-US$820 million (FY22: Adjusted net income stood at US$620.7 million).
Key Risks
The company is exposed to risks and uncertainties associated with the Covid-19 pandemic. It is susceptible to any slowdown in the markets it serves that would lead to decreased demand for its products and, in turn, impact its sales and operating income. Significant and higher competition in the building products industry would adversely affect its business.
Valuation Methodology: Price/Earnings Per Share Based Relative Valuation (Illustrative)
Technical Overview:
Daily Price Chart
Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)
Stock Recommendation
The stock has been valued using P/E multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight premium has been applied to P/E Multiple (NTM) (Peer Average), considering its strong financial results in FY22, robust cash flow generation, and long-term strategy.
Considering the factors above, and decent outlook, we give a “Buy” recommendation on the stock at the current market price of $36.60 per share as of 30 May 2022 (Time: 10:31 AM (GMT+10), Sydney, 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.
James Hardie Industries PLC (JHX) is a part of Kalkine’s Global Real Estate Product
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.
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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