Why the CSR (ASX:CSR) share price is surging today

About Latest Posts Brendon LauBrendon's passion for shares started by accident in 2003 and he has worked in various roles …

| More on:
CSR share price rising asx share price represented my man in hard hat giving thumbs up

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The CSR Limited (ASX: CSR) share price surged on Tuesday as its seen to be one of the best placed to ride the ongoing construction boom.

The latest building approvals data released by the Australian Bureau of Statistics is firing up the sector. But the focus is clearly on CSR.

The CSR share price jumped 4.9% to $6.04 today. In contrast, the Boral Limited (ASX: BLD) share price added 1.3% to $6.91, Adbri Ltd (ASX: ABC) share price gained 4% to $3.36 and GWA Group Ltd (ASX: GWA) share price increased 3.5% to $2.98.

Strong approvals data supports building materials sector

Building approvals was strong even without the benefit of the government's Home Builder stimulus. This shows the underlying strength in the sector, according to Citigroup.

"We maintain a constructive outlook with low rates and strong established house price growth to underpin our housing starts forecast of +18% growth in the June 2021 quarter," said Citi.

"The pace of approvals has been running faster than this, presenting upside to our forecasts."

CSR share price better placed to boom

The broker believes we are still in the early stage of the earnings upgrade cycle. This means the CSR share price is particularly well positioned to rally further and Citi is recommending investors buy the shares.

"We forecast housing starts to grow by +18% to 49,717 for the June 2021 quarter, which brings starts to 201.8k in FY21e," said Citi.

"Should the current run-rate in approvals be maintained, this could present upside risks to our forecasts. CSR is best exposed to domestic housing, which drives ~80% of Building Product sales."

Renos taking off

Households are also spending big on renovations. I didn't need the ABS to tell me that as I am sandwich between neighbours who are making major modifications to their homes while I struggle to work from home in lockdown Melbourne.

Nonetheless, the data is impressive. The value of renovation activity approved increased 57% in April, and that comes off the 52% uplift in March.

I am sure Wesfarmers Ltd (ASX: WES) shareholders would be happy about that given the conglomerate owns Bunnings.

Part of the market that isn't doing as well

However, commercial building activity remains volatile. This is one reason why Citi doesn't think investors should buy the GWA share price.

"The value of commercial work approved increased by +6% in April 2021, down from the +50% growth seen in November 2020," explained Citi.

"Given long lead times in non-residential work, evidence of a more sustained turnaround is required before we become more positive on GWA (Neutral).

"For GWA, commercial and multi-res drives ~40% of overall sales and likely a larger proportion of earnings."

Motley Fool contributor Brendon Lau owns shares of CSR Limited and GWA Group Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »