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CSR Limited reports: Should you buy?

The underperformance curse afflicting CSR Limited (ASX: CSR) may have been broken.

The building products company surged to a one-month high in early trade after it posted its best profit in five years.

The stock added 4% to $3.90 on the back of a back of an 82% jump in normalised net profit to $146.5 million for the year ended March 31, as trading revenue increased 16% to $2 billion.

Revenue was in line with what the market was expecting but its underlying earnings per share of 29.1 cents was ahead of the average analysts’ forecast on Reuters of 26 cents a share.

But it was the dividend that was the bigger surprise to me. The company has elected to pay a final dividend of 11.5 cents, which puts its full year dividend at 20 cents a share. That’s double what it paid in the last financial year.


The stock has been lagging its peers and trades at a discount to its peers on a price-earnings (P/E) basis, but I think this gap will close significantly over the short term, especially since CSR is well placed to benefit from strong detached and multi-dwelling construction activity.

Despite today’s gain, CSR trades on an underlying trailing P/E of 13.5 times when rivals like Boral Limited (ASX: BLD), Brickworks Limited (ASX: BKW) and James Hardie Industries plc (ASX: JHX) trade at around 20 times, if not above that.

That makes CSR a “buy” in my book.

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Motley Fool contributor Brendon Lau has no position in any stocks mentioned. Follow me on Twitter -

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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