Post by
retiredcf on Aug 30, 2021 9:03am
CIBC Details
HARDWOODS 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.