CSR (ASX:CSR) is one of the oldest companies on the ASX having been founded in 1855. Over that time it has grown to about $2.5 billion in revenue and the same in market capitalisation.

CSR is a fairly cyclical business with demand for its products tied to the building cycle. Sales peaked at $2.5 billion in 2017 and then gradually declined to $2.1 billion in 2021 before rebounding in 2022. Sales reached a new high of $2.6 billion in the recently released results for the full year to 31 March 2023.

The share price has rallied strongly this financial year from a low of $3.93 in June last year to the current level of $5.37 a rise of 37%. This is despite headlines of a slowdown in housing construction on account of builders going bankrupt.

The current expectation amongst market analysts is that sales growth has peaked with small declines in revenue forecast for the next two years. This contrasts with a very strong result in FY23 and comments from the CEO Ms Coates that the pipeline is strong and the momentum for orders still solid.

Part of the explanation for the growth over the last two years was the additional support provided by government schemes introduced to alleviate the pandemic. The government’s HomeBuilder incentive scheme fuelled demand for building supplies. Despite the cut off for applications being in April 2021, construction was able to be commenced up to 18 months later. There were approximately 121,000 applications submitted. A lot of CSR’s building products are used in the later stages of the construction process, which further extended the duration of demand for CSR products.

In last October’s Federal Budget, the Government set a goal of developing one million new homes in Australia over 5 years from 2024 with financial incentives provided to help achieve that goal. With governments, both Federal and State focused on boosting housing, the underlying demand for quality CSR products should remain robust should the building industry increase capacity.

CSR’s diversified product mix also works in its favour. Their biggest segment is building products and includes Gyprock plasterboard, PGH bricks and pavers, Monier roofing, Hiebel lightweight building blocks and Bradford insulation. 78% of CSR’s earnings before interest and tax came from the building products business, 20% came from their property business and 2% from the…

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