This report is an updated version of the report published on 10^th May 2022 at 3:21 PM (GMT +10)

James Hardie Industries plc

JHX Details

James Hardie Industries PLC (ASX: JHX) is the world’s largest producer as well as marketer of high-performance fiber cement siding and backerboard. JHX is also a market leader in Europe for fiber gypsum products.

Results Announcement (3rd quarter and Nine Months ended 31^st December 2021)

• In Q3 FY 2022, the company’s North America fiber cement segment net sales rose 24% to US$644.9 Mn and adjusted EBIT rose 18% to US$183.3 Mn on the YoY basis. Its Europe building products segment net sales rose 14% YoY to €97.6 Mn and adjusted EBIT rose 18% YoY to €10.4 Mn. In the third quarter, JHX delivered growth above market as well as robust returns.
• In the 9 months, its net sales rose 26% YoY to US$2,646.5 Mn and adjusted EBIT increased 29% YoY to $590.3 Mn.
• Notably, robust operating cash flow generation of US$553.3 Mn in the first 9 months was due to continuous improvement in the company’s LEAN manufacturing performance, robust profitable organic sales growth as well as the integration of JHX’s supply chain with its customers.

Source: Analysis by Kalkine Group

Recent Updates

Recently, JHX announced that it has entered into an agreement to buy land in Melbourne, Victoria, Australia in order to enable continued capacity expansion.

In the release dated 23^rd March 2022, JHX confirmed that Mr Dean Seavers has resigned as the non-executive director.

JHX would be conducting the management briefing on its Q4 FY 2022 results on 17^th May 2022.

Outlook

Considering the continued, robust execution of the global strategy throughout all 3 regions as well as the expectation for the continued residential and market growth in the USA, JHX has raised its guidance for FY 2022, ending 31^st March 2022.

Its adjusted net income guidance range is US$620 Mn-US$630 Mn. For fiscal year 2023, it has given adjusted net income guidance range of US$740 Mn-US$820 Mn.

Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Key Risks

The company is exposed to the risks related to the COVID-19 pandemic. It is also exposed to numerous risks which are external in nature.

Stock Recommendation

Notably, working capital reduced by US$19.9 Mn during the first 9 months of fiscal year 2022.

The stock has been valued using Price/EPS multiple based relative valuation (on an illustrative basis) and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to Price/EPS Multiple (NTM) (Peer Average) (approx) considering the upgradation in the guidance as well as decent outlook.

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.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the current market price of NZ$37.460 per share (New Zealand Time: 10:39 AM (GMT +12)) as on 10^th May 2022.

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.

Disclaimer

Kalkine New Zealand Limited is authorised to provide general advice only. The information on this website does not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions.