ASX growth stock Johns Lyng Group Ltd (ASX: JLG) is one of the most exciting S&P/ASX 200 Index (ASX: XJO) shares in my opinion.
Johns Lyng specialises in providing rebuilding and restoration services after insured events such as fire, storms and flooding.
There are four key reasons why I really like the ASX growth stock.
Strong catastrophe growth
The company has a growing catastrophe response division which is growing at a very fast rate.
It saw catastrophe revenue of $371.3 million in FY23, which was an increase of $125.3 million.
The ASX growth stock has increased its capabilities and presence, but there has also seemed to be an increasing number of damaging and expensive storms. This is increasing the volume of (potential) work for the company.
Storm activity in Australia and the US is obviously unpredictable, but it does seem to be happening regularly enough for the company to generate sizeable earnings, even if it's lumpy.
Good core growth
The company's insurance building and restoration services division is reporting impressive double-digit growth in each result – in FY23, its business as usual (BaU) revenue grew 32.2% to $775.3 million.
While we can't assume that percentage growth rate will last forever, it's compounding at a pleasing pace over time, which is making the business much bigger.
Thankfully, it seems like a scalable business, where the ASX growth stock's profit can grow faster than revenue.
FY23 total revenue rose 43.2% to $1.28 billion, total earnings before interest, tax, depreciation and amortisation (EBITDA) grew 42.9% to $119.4 million and total net profit after tax (NPAT) went up 64.3%.
International expansion
When the company first listed several years ago, it had 20 locations nationally. It is now a multi-national business with 111 Australian and New Zealand locations and over 51 locations in the US.
It wasn't too long ago that it expanded into New Zealand, opening further growth for the company.
The US is a massive market, where it could become a very sizeable player if it's able to take material market share there. It was recently appointed to the Allstate emergency response and mitigation panel, which is one of the largest insurance companies in the US.
Management has also indicated that the ASX growth stock can take its business model to other countries.
Defensive expansion
As we can see, the core offerings of the business are compelling. I also like the additional growth that the business is creating by making acquisitions in adjacent areas where it can create synergies with the existing businesses.
One of the areas where it's growing is in the strata/body corporate management space. Not only does this sector have annuity-like earnings each year, but it can also utilise Johns Lyng services where appropriate for repairs at repairs.
Another area that Johns Lyng has expanded into is fire, gas and electrical testing and compliance. Again, the earnings from this division can be annuity-like, and there are synergies that can be extracted.
I think the ASX growth stock can make numerous bolt-on acquisitions in the years ahead, which is a good tailwind.
