One broker is optimistic about the outlook for the construction materials giant.
The post Why this top broker sees 50%+ upside to the Boral share price appeared first on The Motley Fool Australia. –
The crash in the Boral Limited (ASX: BLD) share price could spell opportunity with a leading broker highlighting a 50%-plus potential gain for the building materials supplier over the next 12 months.
The news will be a relief to embattled shareholders. The Boral share price has tumbled by more than 60% in the past year and itâs now hovering around a two-year low.
In contrast, the S&P/ASX 200 Index (ASX: XJO) is down a more modest 11% over the period.
Why the Boral share price got plastered
There are several reasons why investors have shunned Boral shares. The power crisis is one thatâs weighing on sentiment as Boral is a big energy user.
The war in Ukraine sent power prices surging and thatâs contributing to rampant inflation. This, in turn, is forcing central banks, including ours, to pull the handbrake by lifting interest rates.
Herein lies the second whammy for the Boral share price. Higher interest rates are rapidly cooling the housing construction market.
Building industry in trouble
There have also been a number of high-profile builders collapsing or coming close to bankruptcy in recent times. These include Probuild and Metricon.
There are warnings that more could be about to fall over as the sharp rise in building costs push many to the wall. These home builders canât pass on rising costs to customers as the properties are sold through fixed-priced contracts that were signed before the inflation genie escaped from its bottle.
That puts Boral in an unenviable position. Demand for its products will be hit by a slowing housing construction market, while thereâs a risk of bad debts if builders go under.
ASX building shares underperforming
But it isnât all bad news. The analysts at Macquarie believe the sell-off may be overdone despite acknowledging the headwinds.
The broker said:
The sector has de-rated significantly as macro conditions deteriorate. While not a conducive context, we maintain a focus on stocks with alternative growth potential, R&R [remodelling and restoration] and infrastructure exposure.
How much is the Boral share price worth?
In that context, Macquarie reiterated its âoutperformâ recommendation on the Boral share price. Itâs 12-month price target on the shares is $4.05 each.
Other shares in the sector that the broker likes include James Hardie, Adbri and Reliance Worldwide Corporation Ltd (ASX: RWC).
The post Why this top broker sees 50%+ upside to the Boral share price appeared first on The Motley Fool Australia.
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Motley Fool contributor Brendon Lau has positions in Macquarie Group Limited, Reece Australia Limited, and Reliance Worldwide Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Reliance Worldwide Corporation Limited. The Motley Fool Australia has recommended Macquarie Group Limited and Reliance Worldwide Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.