Shares in CSR Limited (ASX: CSR) are tanking from the open today to now trade 2% lower at $5.61 apiece. Aside from that, it's been a difficult year for CSR shares, having slipped into the red during that time.
Not all are as downbeat on the company, however. Analysts at JP Morgan rate CSR as a buy and reckon there is plenty more legs for the stock to run higher in 2022. CSR's single-year price return is charted below against the benchmark index.
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What's got this broker bullish on CSR shares?
Analyst at JP Morgan are overweight on CSR with a $6.15 price target, noting that, while "sentiment around the cycle is expected to slow, volumes are supported for at least the next 18 months given lags to activity".
This could bode in well for the company's earning cycle, the broker says, particularly given its track record in meeting earnings expectations.
In fact, the firm reckons this is a key factor in the investment debate here, a point that instils confidence in its conviction on CSR.
"While earnings expectations are running high for CSR", the broker said, "strong execution in past cycles gives us confidence in CSR's ability to meet this demand".
And with the recent sale of land at Badgerys Creek, analysts have updated their modelling and the results indicate more bullish outcomes.
"We are updating our model to reflect the sale of 4.6 hectares of land at Badgerys Creek for $20.77 million ($450 per sqm)", it said.
"CSR now expects Property EBIT of $46 million for FY22e…Our FY22e EBIT forecasts are now $288 million, up 4% from $277 million previously".
That's not all that's got the broker urging its clients to allocate to CSR. Analysts at the firm also note the potential for a surprise in the company's building products segment, and, with $130 million in cash on the balance sheet, could be ripe for more acquisitions.
"With the earnings leverage to remain below past cycles, despite a record level of construction activity, we could see Building Products earnings upside in FY23", the analyst remarked.
"We also see potential for both property potential to be unlocked and the balance sheet to be deployed via capital returns or accretive [mergers and acquisitions] M&A".
A quick summary on CSR shares snapshot
In the last 12 months, CSR shares have held gains – unlike most of its peers – and are currently up 1% in that time.
This year to date however, they have faltered 4% and are further in the red during the past month of trading.
