CSWI - CSW Industrials: Long-Term Compounder With Room To Growth

2024-04-10 06:58:06 ET

Summary

• CSW Industrials' revenue has grown impressively (CAGR: +13%), driven by a combination of M&A, innovation, and industry growth, with the company focused on niche industries with barriers to competition.
• Management has executed an impressive roll-up M&A strategy, underpinning its portfolio of brands with strong operational capabilities and the ability to subsequently innovate to maintain momentum.
• We expect growth to be 5-8% in the coming decade, with scope for further margin improvement. Increased infrastructure spending globally will only act to support this.
• CSWI is materially outperforming its peers with no evidence of a slowdown, reflecting its aggressive and unique approach to industrials.
• Whilst the business is not close to being undervalued, we do still see an upside due to the nature of its strategy. An FCF yield of ~4% should not be underestimated with growth.

Introduction and thesis

CSW Industrials ( CSWI ) is a diversified industrial growth company with a portfolio of leading products and services, focused on safety, maintenance, and infrastructure requirements across various end markets. The company is headquartered in Dallas, Texas, and operates through three business segments: Industrial Products, Specialty Chemicals, and Coating, Sealants & Adhesives.

We are very much convinced by the quality of CSWI. Management has executed upon a fantastic strategy to build a highly competitive, moat-protected business, that is positioned well with market leading margins without foregoing growth....

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