The James Hardie Industries Plc (ASX: JHX) share price has been on the slide for much of the past year, but according to the team at Macquarie, that's creating a significant buying opportunity.
The company's shares reached their 12-month high of $57.20 around this time last year, with the catalyst for the share price decline being the company's announcement in mid-March that it intended to acquire US decking manufacturer Azek for US$8.75 billion.
The shares fell from levels around $50 at the time and never recovered, and dipped again on the announcement of the company's second-quarter results in August.
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Shareholders not happy
The company also received a thumping protest vote against its remuneration report at the annual general meeting in late October, with 66.3% of the votes cast going against the report.
The board said in a statement at the time, "we recognise that we have more work to do on our promise to shareholders''.
The board went on to say:
James Hardies has reached an important period in its history as we execute on our strategic growth plans and realise the tremendous potential of our combination with Azek. With our comprehensive portfolio of exterior brands and a powerful manufacturing and support network, we are poised to drive long-term growth and success in the dynamic building products industry.
James Hardie said its second-quarter results reflected the strong performance of its deck, rail, and accessories segment, "and our continued progress towards realising substantial cost and revenue synergies from the Azek integration''.
At the time of purchase, James Hardie estimated the combined companies would generate at least US$350 million in additional EBITDA from synergies once the two companies were fully integrated.
Shares looking cheap
The team at Macquarie have just run the ruler over James Hardie, and has come to the conclusion that at current levels, the shares represent good buying.
The Macquarie analysts said the positioning in the decking market through the purchase of Azek appears to be solid.
They went on to say:
The decking market has been in focus. We think AZEK enjoys superior channel positioning compared to peers, which will make a difference in the medium to long term in maintaining solid economics. The integration process appears to be going well, with Jame Hardie making progress in the two-step and one-step channels alike.
The Macquarie analysts said while market conditions overall were tough, "an evolving AZEK integration story, a bottoming of markets and valuation are in support of our thesis''.
Macquarie has a 12-month price target of $41.70 on James Hardie shares, which would represent a total shareholder return of 40.2% if achieved.
James Hardie shares closed Monday's trading session at $29.90, valuing the company at $17.3 billion.
