Our opinion on the current state of ITE

Italtile, controlled by the Ravazotti family, is a prominent franchisor of tiles, sanitary ware, flooring, and home finishing products, with a unique business model that encompasses manufacturing and wholesaling its products. The company boasts 206 stores and 6 online web stores, alongside a substantial property portfolio valued at approximately R4.3 billion. Italtile's strategic acquisitions of Ceramic Industries and Ezee Tile have solidified its position in the manufacturing sector, complementing its robust retail operations.

The company has witnessed an uptick in sales, attributed to the increased trend of working from home and consumers' desire to enhance their living spaces. Italtile's commitment to expansion is evident in its plans to open 10 to 15 new stores within the year, alongside a strategic move to repurchase around R240 million of its own shares. However, the civil unrest and the COVID-19 pandemic have posed challenges, leading to temporary store closures and the destruction of two outlets.

For the six-month period ending on 31st December 2023, Italtile reported a slight 2% decline in turnover and a 15% decrease in headline earnings per share (HEPS), although its net asset value (NAV) experienced a 10% increase to 684.4 cents per share. Despite these challenges, the company has maintained a financially robust retail operation, supported by a strong balance sheet and significant cash reserves, which have doubled from R0.8 billion in 2022 to R1.5 billion.

The share price trajectory of Italtile has experienced fluctuations, with a notable downturn during the COVID-19 pandemic to levels around R10, followed by a period of sideways and downward movement. Currently trading at approximately 1090 cents per share with a price-to-earnings (P:E) ratio of 8.24, Italtile presents a compelling buying opportunity for investors. However, prospective investors are advised to exercise patience and monitor the share's performance for a breakout above the current downward trendline before committing to purchase, to ensure entry at a potentially more favorable market position.