Most readers are going to be at least passingly familiar with major HVAC companies like Carrier (CARR), Lennox (LII), and Trane (TT), but Daikin (OTCPK:DKILY) (6367.T) is likely less familiar, even though it is the leading HVAC company in the world by a healthy margin and one of the largest players in the U.S. (through the Goodman brand, mostly). While Daikin has the favorable exposure to strong residential activity in the U.S. and green building retrofits in the U.S. and Europe, there’s also an above-average growth angle here from Daikin’s large exposure to growing Asian markets, including, but not limited to, China.
There really aren’t any “cheap” HVAC stocks in my opinion (though Johnson Controls (JCI) is looking a bit more interesting), but I think Daikin is priced reasonably enough relative to its growth prospects to be worth considering. With what I expect will be mid-single-digit revenue growth and high single-digit FCF growth, as well as healthy margins, I see high single-digit total annualized return potential.
I also want to note that the U.S. ADRs are pretty liquid, with a 90-day average daily volume of over 76,000 shares.
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