James Hardie Industries PLC (ASX: JHX)

James Hardie Industries PLC is an ASX listed manufacturer of fiber cement, fiber gypsum, and cement bonded building products for interior and exterior building construction applications.

JHX expects to release its Q1 FY25 results on 13 August 2024.

Recommendation Rationale – SELL at AUD 53.79

• Increase in SG&A Costs: During Q4 FY24, SG&A cost increased by 46% YoY, primarily due to higher employee costs and marketing initiatives.
• Technical Standpoint: The momentum oscillator, 14-day RSI (~67.95) is approaching the overbought zone; and thus, price can face correction from the current levels.
• Trading Around Resistance: JHX’s share price has surpassed the ‘Resistance 1’ level recommended on 4 July 2024; thus, share price retracement can be expected.
• Overvalued Multiples: On a forward 12-month basis – key valuation multiples (EV/Sales, EV/EBITDA, Price/Earnings, and Price/Cash Flow) are higher than the median of the Basic Materials’ sector.
• Raw Material Costs: James Hardie relies on raw materials such as cement, sand, and cellulose fibers to manufacture products. Fluctuations in the prices of these raw materials could affect profitability, especially if the company is unable to pass on increased costs to customers.

JHX’s Daily Price Chart

(Source: REFINITIV; Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY Mar'26E) (Illustrative)

JHX is expected to trade at a premium based on the increased cash position, capacity expansion program, and increased net sales in FY24. The following peers have been considered for conducting valuation: Sims Ltd (ASX: SGM), Orica Ltd (ASX: ORI), and Ventia Services Group Ltd (ASX: VNT).

Given its current trading levels, recent rally in the share price, and risks associated, it can face resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 53.79, at 11:05 AM AEST, as of 23 July 2024.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 23 July 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which 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 at which 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: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.