TopBuild: Strong Buy on Margin Resilience and Valuation Reset with Asymmetric Upside

We initiate coverage of BLD at Strong Buy with a $433 PT. TopBuild Corp. is the largest installer and distributor of insulation and specialty building products in North America, serving residential, commercial, and industrial construction end markets.

Beneath the fatiguing industry mature exterior lies a company that has steadily built a durable cost and service platform capable of defending profit through housing cycles, while incrementally building its growth engine through branch consolidation and targeted acquisitions.

In the face of a market still steeped in macro skepticism on the high rates and soft SF starts backdrop, our conviction is anchored in the company’s proven ability to defend margins (19.3% modeled FY25E, above the mid-point of guidance), as revenues moderate.

Recent consolidation of 33 branches and subsequent continued disciplined labor reductions secured $30mn of annualized cost savings, enabling TopBuild to absorb a 10% volume decline while maintaining profitability well above consensus for both FY25E and FY26E.

With a robust M&A pipeline and signs of resumption of residential fiberglass price stabilization, we model an EBITDA rebound to $1,080mn in FY26E, which supports 6.9% y/y growth, confirming our view that trough operating leverage has likely passed.

Our blended EV/EBITDA multiple of 12.8x FY26E is positioned below historical and peer ranges, balancing the cyclical macro headwinds against the expanding earning power and asymmetric return profile.

The key risk remains a deeper housing correction or deflation, however, with consensus underestimating the company's ability to defend margins and take cost actions, the R/R skews heavily positive.