Plumbed In

Reliance Worldwide delivered a solid FY17 result with a net profit of $65.6 million, 2.5% above Ord Minnett’s estimate and 4.8% ahead of its prospectus forecast. Operating earnings (EBITDA) of $120.7m were 1.6% ahead of our forecast, with both the Americas and Asia Pacific beating estimates.

 

Group net sales rose 12.6% (and 17.2% on a constant-currency basis), above our expectations. This outcome was driven by the Americas division, which benefited from continued penetration of its SharkBite product suite and the execution of its retail channel expansion through US hardware retailer, Lowe’s. Growth in operating earnings was even higher, up 21.8%, as procurement and manufacturing efficiencies drove margin expansion across the group.

 

Management set a narrow guidance range for FY18, with operating earnings expected to land within $145–150 million, in line with our $147 million estimate.

 

We believe Reliance offers an attractive investment proposition, with high-quality earnings growth underpinned by continued penetration of its push-to-connect (PTC) fittings, growth in other core products and expansion of its products – such as EvoPEX, 2XL and Holdrite – into new markets. We maintain our Accumulate recommendation on Reliance and have raised our target price to $4.00 from $3.70.

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