Updated: April 1, 2025

James Hardie (ASX: JHX) announced plans to merge with U.S. listed manufacturer AZEK in a cash and shares transaction totalling $US8.8 billion ($14 billion). AZEK closed on Friday at $41.39, with the deal giving shareholders a mix of cash and James Hardie shares worth $US56.88, with ownership of 26% of the combined new company.

James Hardie Broker Ratings

01/04/2025

• Macquarie downgrades James Hardie Industries to Neutral from Outperform and slashes its target price to $40.20 from $65, significantly reducing the multiple to 13x FY26 estimates. While acknowledging AZEK as an attractive asset that addresses weakness in Hardie's trim product, the broker notes the acquisition comes at a steep 26% premium to AZEK's volume-weighted average price (20.8x NTM EV/EBITDA) and will ultimately dilute shareholder returns.

26/03/2025

• Ord Minnett has downgraded James Hardie Industries to Hold following its acquisition of Azek, cutting the target price to $47 from $59. While acknowledging Azek's high quality, the broker highlights several concerns: the deal would be 7% EPS dilutive in FY26 and FY27, the 37% premium exceeds synergy value (implying negative NPV for shareholders), and proforma leverage will increase significantly to 2.5x in FY26 from 0.7x in FY24 amid a weakening US housing market.

25/03/2025

• Morgans maintains an Add rating on James Hardie Industries while lowering its target to $54 from $60, viewing the AZEK acquisition as quality-enhancing but dilutive to shareholders through increased gearing. The deal's success hinges on achieving US$350m in synergies through cost reductions by FY28 and commercial synergies until FY30, alongside a US housing repair/remodel rebound. The broker believes the reduced target price adequately compensates for the additional risk in the uncertain environment.

• Citi maintains its Neutral rating and $56 target on James Hardie Industries following the AZEK acquisition announcement. While acknowledging the deal's sound strategic logic—particularly how PVC trim complements fibre cement sales in the Northeast and expands the product range—the broker awaits more information for a complete assessment. Citi notes potential pricing risks, with the US$56.88/share offer below its US$61 target but above AZEK's 52-week high, potentially prompting shareholders to demand more. However, recent negative price action suggests a possible high single-digit reduction in the offer.

• Morgan Stanley upgrades James Hardie Industries to Overweight from Equal-weight, viewing the 21% share price decline following the AZEK acquisition as excessive. Despite acknowledging the premium paid for the US$8.75bn deal and short-term EPS dilution, the broker maintains its $55 target. Management targets US$350m in synergies (US$125m in cost savings plus commercial revenue opportunities), highlighting cross-selling potential with 55% of contractors handling both siding and decking. Earnings forecasts remain unchanged pending deal completion.

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