CSR Builds To Property Segment Momentum

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Detached housing momentum has spurred strong results for CSR in the first half of FY21, and analysts note continuing growth in Property looks to sustain results.

-CSR’s Building Products segment drove strong first half results
-Strength in the detached housing market contributed to Building Products results
-Property segment expected to deliver continued growth after strong guidance upgrades

By Danielle Austin

Continuing momentum in the detached housing market has driven strong results from CSR’s ((CSR)) Building Products segments, as reflected in the company’s first half results. Before-tax-earnings from the segment were up 25% on the previous period, beating consensus forecasts by 6%. Compared to the previous period segment revenue was up 3% and the earnings-before-tax margin increased to 14.7% from 12.1%.

Analysts from Citi felt results were a mixed bag and noted declines during the period in both high density and commercial construction were a slight drag on results, but the strong demand in the detached housing market more than offset any negative contributions. Looking ahead, Citi expects the impact of fewer trading days to be evident in the Building Products segment’s second half results and expects pricing to be relatively flat.

Credit Suisse also suggested a slight first half skew will appear in Building Products’ full-year results. The broker noted the Property segment continues to report strong results, as well as the company upgraded segment before-tax-earnings guidance for FY22 to $34m, a huge beat on an expected consensus $26m. The broker also highlighted the company is guiding to around $50m in earnings for the segment from FY23-25, with additional uncontracted potential upside.

Similarly, Macquarie noted while the Building Products segment reported an exceptional outcome for the first half, it is continuing realisations in the Property segment that is building CSR’s earnings profile. Commenting on CSR’s guidance for the Property segment, the broker noted while the FY22 outlook is marginally stronger than expected, the FY23 outlook is markedly stronger than expected.

UBS noted strong cost control helped drive the result in the Building Products segment and expects costs will increase as covid-related restrictions ease likely impacting on Building Products margins in the second half. It was also highlighted that despite CSR guiding to a first half skew, CSR expects the current backlog to sustain a longer cycle into the fourth quarter, resulting in a higher 47% weighting compared to a usual 45% in the second half. The broker also found CSR’s valuation for the Property segment conservative and sees further potential upside.

Updates on outlooks

Citi maintains its Buy rating, and although the broker decreased its target price to $7.20 from $7.40, it remains the highest target price among the brokers monitored daily by FNArena. Citi also upgraded before-tax-earnings for the Property segment for both FY22 and FY23 in line with company guidance.

Credit Suisse retains its Neutral rating and increases its target price to $6.70 from $6.00. The profit after tax forecasts are upgraded 10% and 21% for FY22 and FY23.

Macquarie retains its Outperform rating and increases its target price to $6.80 from $6.45. Earnings per share forecasts are upgraded 0.3%, 7.6% and 7.5% for FY22, FY23 and FY24 respectively.

UBS retains its Buy rating and increases its target price to $6.70 from $6.10. UBS expects the property segment to generate an average $55m in earnings before tax from FY22-25.

Morgan Stanley and Ord Minnett rate the stock Overweight and Hold with updated price targets of $6.60 and $6.30 respectively.

FNArena's consensus price target of $6.71 suggests some 6.3% in upside left from yesterday's closing share price.

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