CIBCAugust 17, 2021 Earnings Update
DOMAN BUILDING MATERIALS GROUP LTD.
Story Intact, Commodity Correction To Weigh On H2 Margins
Our Conclusion
We are reiterating our Outperformer rating on Doman but moderating our price target to $9.00 (from $10.00) on lower estimates. While the sharp correction in commodity prices will weigh on organic sales comps and margins in H2/21, we continue to see DBM as well-positioned to benefit from a multi-year period of robust shipments for treated lumber across North America (as well as heathy Canadian distribution volumes) given low mortgage rates, rising home equity levels and an ageing NA housing stock. Additionally, we expect the recent US$408 million Hixson Lumber acquisition (closed June 4) to open up additional acquisition opportunities for DBM across the U.S. beyond its prior focus on the U.S.West Coast.