Shares of James Hardie have dropped over 17% in the last three trading sessions and posted a 2.5-year low of $16.60 in early trade today.
The catalyst for the sell off was that JHX’s 2Q EBIT and NPAT fell short of consensus forecasts and management downgraded full year NPAT by 5%.
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In the bigger picture, the softening of Q2 margins due to input cost inflation looks to be transitory and the group is still expected to generate net profits of between US313 and US 335 million for FY 2019.
As such, we consider the recent drop in the share price as an opportunity to invest in a high quality business at a time when external factors are increasing input costs.
JHX is part of our ASX Top 50 portfolio and we see scope for a $20.00 initial price target over the medium-term.
James Hardie
