Stephens initiated coverage of James Hardie with an Overweight rating and $31 price target. While the Azek deal was met with initial skepticism, and the choppy demand environment has since weighed on the shares, the firm believes the current valuation does not accurately reflect the value of two roughly 30% EBITDA margin businesses with multi-year material conversion runway, value-based product pricing power, and a long runway of meaningful commercial synergies. The firm added that the stock presents an attractive risk-reward.
