UBS upgrades James Hardie to Buy
UBS has upgraded JHX (BUY, price target $8.30) despite headwinds in the US and rising pulp prices. The upgrade reflects the discount that has emerged due to recent share price weakness.
UBS notes that the price of pulp, which accounts for up to a quarter of cement costs, is up 38% from recent lows. The broker expects JHX to be pressured by the price increase in the March and June quarters, although the impact will be mitigated by higher volume.
In addition, UBS notes there is ongoing uncertainty and stress in the US housing market. The broker notes that delinquent loans are still rising sharply with volatility affected by the timing of the house tax credit expiration.
However, notes that JHX has underperformed the building materials sector by 10% in the last month. This is has seen the stock trade at a 15% discount to the broker’s valuation, prompting an upgrade to BUY.
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