This ASX 200 Building Materials Share Is A Buy (Not James Hardie): Expert

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S&P/ASX 200 Index (ASX:XJO) Stocks representing building materials suppliers are currently in a bind.

Interest rates are rising sharply, which means consumers will have less money for renovations and building new homes.

This is logically not ideal for companies that supply construction materials.

So many of these ASX 200 stocks have been selling off lately, and that might have opened up a buying opportunity.

After all, if sentiment is so weak today, eventually interest rates will stop rising and activity will normalize.

Several experts tipped the fiber cement board supplier James Hardie Industries plc (ASX:JHX) as a cautious pickup lately.

But a similar ASX company that isn’t often talked about is Limited CSR (ASX: CSR).

This week, Fairmont Equities Managing Director Michael Gable explained why he thinks CSR is ripe for buying right now.

Why the ASX 200 Shares CSR Can Fight Lean Times

Gable admitted that there are risks for the building products sector, but many factors abound that could offset the impact of rising interest rates.

“On the positive side, the rate of decline in housing starts in Australia (>20%) is not expected to be as steep as the declines evident in past cycles of -25% to -45%,” he said. written on the Fairmont blog.

“One of the factors supporting the lower than historical rate of decline is household formation… A recovery is expected in FY25 as population growth returns to full capacity.”

Management noted how “multi-family” and “non-residential” construction appeared to be picking up after postponements during the early years of the COVID-19 pandemic.

“The recovery in these volumes may help mitigate the anticipated impact of the decline in single family dwellings in FY24.”

Gable added that a lesser-known business arm of the ASX 200 stock, the real estate division, is going wild.

“The company has 457ha of existing land holdings which are in operation in key locations in western Sydney which are expected to benefit from structural tailwinds,” he said.

“These include a new Western Sydney airport, booming e-commerce business and strong demand for distribution centres.”

This real estate activity is increasingly holding back the CSR share price.

“While there is downside risk to the valuation of the building products division, the overall group valuation is likely to be supported by the real estate division, which now accounts for a larger portion of the group’s valuation ( currently accounting for about 1/3 of the value of the enterprise value group).”

The stock price could be at the start of a rise

From the start of the year to June, CSR stocks fell 34%. But in the past two months, the stock has rebounded 20%.

Gable feels like he’s on a roll now.

“It broke higher in mid-July on good volume,” he said.

“So far we have CSR that respects the breakout as it continues to climb. Momentum looks good and the stock price should continue to rally.”

CSR will not release its numbers this month as its fiscal year ends in March.