Australian Residential Demand And Low Carbon Aluminium Will Expand Markets

Key Takeaways

• Growing demand from residential construction, infrastructure investment, and antidumping measures will support resilient revenue growth and strengthen Capral's competitive position.
  
• Expansion in low-carbon aluminium and value-added products enhances pricing power, sustainability credentials, and margin potential over the long term.
  
• Intensifying import competition, cost pressures, and sectoral shifts threaten Capral's market share, margin stability, and long-term earnings growth, despite ongoing investments in upgrades and compliance.

Catalysts

Together with its subsidiary, Austex Dies Pty Ltd, manufactures and distributes fabricated and semi-fabricated aluminum related products in Australia.

• Pent-up residential construction demand driven by high immigration, falling interest rates, and persistent housing shortages in Australia is expected to significantly lift volumes from the second half of 2025 and into 2026-2027, supporting long-term revenue growth.
  
• The company's leadership in low-carbon, ASI-certified aluminium (LocAl) and acceleration of sustainability reporting standards are likely to position Capral favorably with customers and projects prioritizing emission reduction, expanding total addressable market and improving product mix/pricing power, positively impacting both revenue and net margins over time.
  
• Continued government and private investment in infrastructure modernization and commercial building, along with increased use of aluminium in cladding and sustainable construction, should strengthen Capral's industrial pipeline and underpin resilient revenue growth even as some industrial subsectors soften temporarily.
  
• Strict domestic antidumping measures against unfairly priced aluminium imports (especially from China, Malaysia, and Vietnam) are likely to be renewed and maintained, supporting Capral's competitive position, protecting market share, and potentially enabling margin expansion as local supply demand balance tightens.
  
• Ongoing investments in automation, plant upgrades, expansion of higher-margin value-added products, and direct distribution businesses (such as the Comsupply acquisition and new product launches) are designed to boost operational efficiency and sales mix, supporting higher EBITDA margins and long-term earnings growth.

Capral Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Capral's revenue will grow by 5.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.4% today to 5.5% in 3 years time.
• Analysts expect earnings to reach A$40.3 million (and earnings per share of A$2.71) by about September 2028, up from A$33.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.7x on those 2028 earnings, up from 5.3x today. This future PE is lower than the current PE for the AU Metals and Mining industry at 15.5x.
• Analysts expect the number of shares outstanding to decline by 2.64% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

Capral Future Earnings Per Share Growth

Risks

• Rising imports of fully fabricated windows and aluminium solar rail, particularly from China and other overseas producers, are increasingly penetrating Capral's core residential and industrial markets; this structural shift could erode Capral's market share and revenue over the long term, especially if antidumping measures lapse or are weakened.
  
• Volatile aluminium prices and ongoing inflationary pressures in energy, wages, and freight pose significant risks to Capral's cost base; sustained high input costs or margin compression from volatile LME pricing may negatively impact net margins and profitability if unable to be fully passed on to customers.
  
• Increasing competition from domestic and new international entrants, including a new extruder affiliated with a major Chinese importer setting up in Newcastle, threatens to intensify pricing pressure and reduce Capral's pricing power, directly affecting future revenue and earnings stability.
  
• Secular slowdowns or structural shifts in the Australian construction and industrial sectors (e.g., due to prolonged high interest rates, delayed infrastructure projects, or increased uptake of imported prefabricated materials) expose Capral to cyclical downturns and potential long-term demand erosion, making its revenue and earnings more volatile.
  
• Ongoing capital expenditures required for plant upgrades, digital transformation, and emissions-related compliance may pressure free cash flow, especially if operational improvements lag expectations or demand does not recover as forecast, constraining returns to shareholders and potentially diluting earnings growth.

Valuation

• The analysts have a consensus price target of A$16.65 for Capral based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$731.7 million, earnings will come to A$40.3 million, and it would be trading on a PE ratio of 7.7x, assuming you use a discount rate of 7.7%.
• Given the current share price of A$10.64, the analyst price target of A$16.65 is 36.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.