Wagners Holding Co's 1H result highlights to Morgans the cyclical nature of the industry and the company's leverage to an improving cycle.

The construction materials division was largely behind underlying earnings of $20m in the 1H, up from $4.4m in the previous corresponding period.

Due to better prices and volumes along with cost control, the EBIT margin for the construction materials division increased to 11.8% from 7.4%.

The rating is upgraded to Add from Speculative Buy to reflect lower valuation and earnings risk, as well as the positive operating environment and ongoing M&A across the industry. The $1.15 target is maintained.

Sector: Materials.

Target price is $1.15.Current Price is $0.93. Difference: $0.22 - (brackets indicate current price is over target). If WGN meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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