Our opinion on the current state of ITLTILE(ITE)Italtile (ITE) is a franchisor specializing in tiles, sanitary ware, flooring, and home finishing products, which it manufactures and wholesales through its integrated supply chain. The company is controlled by the Ravazotti family and operates 206 physical stores alongside six online web stores. Additionally, Italtile owns a property portfolio of retail and industrial properties valued at approximately R4.3 billion.
The company's manufacturing business includes a 95.47% stake in Ceramic Industries and a 71.54% stake in Ezee Tile Adhesive Manufacturers. These acquisitions complement its retail operations by providing a consistent and high-quality supply chain, enabling better stockholding management and working capital efficiency.
Italtile has benefitted from increased demand for home improvement products as people continue to work from home, leading to increased "share of wallet." The company has also taken proactive steps to strengthen its financial position, including a share buyback program totaling around R240 million and the addition of between 10 and 15 new stores annually. However, disruptions such as civil unrest and COVID-19 closures have impacted some of its operations, including the destruction of two stores in Orange Farm and Spruitview and temporary closures in Natal and other regions.
In its results for the year to 30th June 2024, the company reported flat turnover and a 7% decline in headline earnings per share (HEPS). Despite these challenges, its net asset value (NAV) increased by 10% to 707.5 cents per share. The company noted a stronger performance in the second half of the year, recovering market share after earlier challenges.
In a sales update for the five months to 30th November 2024, retail turnover grew by 2.2%, while combined manufacturing sales from Ceramic Industries and Ezee Tile showed a smaller decline of 1.6% compared to a 5.9% drop in the prior comparable period.
**Technically**, the share remained range-bound for two years before dropping sharply to around R10 during the COVID-19 pandemic. It broke upward through its long-term downward trendline on 28th June 2024 at a price of 1107 cents and has since risen to 1426 cents. Italtile stands to benefit from anticipated new building activity associated with the formation of a new Government of National Unity (GNU) in South Africa. This positions the company as a potential investment opportunity, especially as demand for home improvement and building materials continues to grow.
