Key message: Sales have slowed down (adjusted for looting impact) after the DIY boom post-Covid. This was well flagged.

  • We update our Cashbuild numbers as we move into CY22.
  • The 1Q operational update confirmed the expected decline in sales after the post-Covid lockdown DIY spending boom.
  • Group sales (adjusted for the looting in July) were down 4% (existing stored down 6%). This has been flagged by management and based on the comments from other companies in the construction materials sector this is not a surprise. We expect the decline to extend into 2Q and 1H FY22.
  • Margins in FY21 were boosted by increased demand and price inflation. We expect gross margins move back to 25% (from 28%) and operating margin to 5-6% (from 8%).
  • Government localisation policies should favour Cashbuild as it does purchase local product where possible, especially cement. This does put it in a good position to grow market share should cement imports be impacted by import tariffs.
  • A slow recovery at P&L Hardware is expected. With the TBC deal off the table management can focus on fixing this struggling chain.
  • We adjust our Target Price down marginally to R325 (from R333). Cashbuild remain a well-run business with continued organic growth potential through new store openings.

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