JPMorgan downgrades Reliance Worldwide stock to Neutral on delayed recovery

Investing.com - JPMorgan has downgraded Reliance Worldwide Corp Ltd (ASX:RWC) stock rating from Overweight to Neutral while reducing its price target to AUD4.35 from AUD5.25.

The downgrade comes despite what JPMorgan described as a "solid FY25 result" for the plumbing supplies manufacturer, with the firm citing elusive end-market recovery as a key concern. JPMorgan now projects markets won’t recover before FY27, with U.S. repair exposure being outweighed by low housing turnover.

In the United Kingdom, JPMorgan expects the market to trend sideways without a clear turning point, noting that promising indicators from the first quarter of calendar year 2025 have quickly faded. The firm highlighted that below-normal volumes in this market ensure significant leverage once conditions improve.

JPMorgan forecasts a net negative EBITDA impact of US$26 million year-over-year in the first half of FY26, attributing this to lower U.S. volumes, tariffs, and only US$4 million in cost reductions. The bulk of tariff impacts are expected in the first half of FY26, compounded by lagging one-off reversions in other segments, particularly in Asia-Pacific.

Despite operational challenges, JPMorgan acknowledged that Reliance Worldwide is "operationally working hard" and faces a "meaningful opportunity when volumes improve."

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