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Why Morgan Stanley has upgraded CSR Limited

Wealth Management firm Morgan Stanley has upgraded building products manufacturer and supplier CSR Limited (ASX: CSR) from underweight to equal-weight off the back of robust housing construction and favourable aluminium pricing.

CSR Limited holds interest in the smelting of aluminium through its 70% stake in Gove Aluminium Finance Limited – which owns 36% of the Tomago aluminium smelter near Newcastle.

The Morgan Stanley upgrade includes a target share price rise of $5.00 from $4.25 – CSR shares were down 1.1% to $5.12 at the time of writing – but have tracked upwards in the last 12-months from a 52-week low of $3.85.

The Morgan Stanley broker “would look for evidence the company is trading at a meaningful discount to its historical multiple or showing more value through the cycle” before adopting a more positive stance.

All eyes will be on CSR as it releases its preliminary report and annual report in May.

Investors who favour CSR could also look to materials sector peers Syrah Resources Ltd (ASX: SYR) which opened steady today at $3.17 and even diversified metals company South32 Ltd (ASX: S32) for possible ins also.

South32 Ltd was up 0.3% to $3.23 at the time of writing.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. 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 Scott Phillips.

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