CIBC DetailsHARDWOODS DISTRIBUTION INC.
Benefiting From More Sustainable Pricing Gains Than Commodity Peers
Our Conclusion
We are reiterating our Outperformer rating on Hardwoods and increasing our price target to C$51 (fromC$48) on higher estimates. HDI continues to execute well, with Q2 delivering further evidence that long-term gross margins in the business are continuing to trend higher. With the $343MM acquisition of NovoBuilding Products having closed 10 days ago, the company’s exposure to housing end-markets has risen to over two-thirds of sales (from the prior ~50% level), positioning HDI well to benefit from the multi-year period of elevated North American housing activity we are forecasting on the back of low mortgage rates and favorable demographic trends. At the same time, we believe HDI (#1 hardwoods distributor) is well positioned to pursue additional accretive acquisitions in the fragmented non-structural architectural building products distribution industry.