Business Strategy and Outlook
Reliance Worldwide produces specialist plumbing and heating products. The firm’s strategy is to expand its share of the push-to-connect fittings category. As a first mover, its SharkBite product range has about 85% market share in the US within the push-to-connect category and is the only brand sold at the two largest home retailers, Lowe’s and Home Depot. Although patents have expired for the original SharkBite and John Guest push-to-connect products, Reliance continues to innovate and has recently introduced SharkBite Max. Marketed as stronger, we think the SharkBite Max can command a price premium over the original product and other push-to-connect brands.
A secondary strategy is to leverage brand awareness and reputation, in addition to relationships with large retailers and wholesalers, to sell products complementary to the firm’s core range. New products are mostly acquired via strategic bolt-on acquisition,s including Holman (2024), EZFlo (2021), John Guest (2018), and HoldRite (2017).
Reliance has moved some of SharkBite’s manufacturing to the US from 2024. In shifting some production to the US, we think this will reduce transportation costs and improve supply in the US, which can be sporadic, with demand peaking when ice storms freeze pipes.
Its product range includes fittings, valves, pipes, water filtration systems, water and gas connectors, and other accessories. Its main brands include SharkBite, John Guest, EZ-Flo, Speedfit, Reliance Valves, and HoldRite. Its biggest geographic exposure is in North America, which accounts for about two-thirds of our forecast midcycle EBITDA, followed by the Asia-Pacific at 20%, and Europe, Middle East, and Africa, or EMEA, at around 15%.
Reliance’s sales are skewed toward the repair, maintenance, and renovation segment, which we estimate contributes about three-fourths of group revenue. The remainder of sales support residential and commercial construction and hot water system manufacturers, which use some Reliance products in the manufacturing of their products.
Bulls Say
- We estimate about three fourths of revenue are from the repair, renovation, and improvement category, which is less exposed to cyclicality in the housing market.
- Greater adoption of Reliance's push-to-connect fittings underpins market share gains and higher profit margins.
- Innovative products such as EvoPex and SharkBite Max will facilitate increased penetration of push-to-connect fitting in the new construction plumbing markets, expanding underlying demand for Reliance’s products.
Bears Say
- Higher interest rates leading to a protracted downturn in housing activity in all Reliance’s operating regions could weigh on group earnings.
- Patents on Reliance’s original push-to-connect products have expired, increasing competition through the proliferation of look-alike products.
- Reliance has very high customer concentration, with Home Depot and Lowe’s representing most of US sales. Adverse developments in either relationship would have a material impact on sales.
We assign Reliance a narrow moat due to intangible assets in the US and UK(about two thirds of EMEA revenue).
Economic Moat
Narrow
We think the brand has built market trust over its 75-year operating history, and 60 years for its acquired company, John Guest. In particular, these brands have two popular push-to-connect products — SharkBite and Speedfit — which are recognized for their trustworthiness, with no at-fault issues in their 25-and 35-year history, respectively. We estimate these fittings contribute about 40% of group revenue and are the group’s fastest growing products as it gains share in the plumbing connector category.
Reliance competes in “behind the wall” plumbing categories, that being plumbing pipe and fittings infrastructure that connect plumbing fixtures such as taps and faucets to the water main. It also sells its products to original equipment manufacturers, or OEMs, of hot water systems. Its main market exposure is in repairs and maintenance, followed by residential new builds. Commercial construction and original equipment manufacturing are smaller segments for the company.
Many of the company’s plumbing products are commoditized, but its push-to-connect products sold under the brand name SharkBite (for the mostly copper version) and Speedfit (for the plastic version) are its most differentiated products. These products disrupt the regular plumbing industry by providing a secure attachment to fit one pipe to another without the use of soldering, glue, or clamps, which are traditionally used in plumbing. This also enables do-it-yourself or repair-it-yourself plumbing.
These products are reliable, with a 25-year warranty, and no known at-fault failures over several decades of sales. Quality is important because a leak could be very serious, and Reliance’s products are trusted due to their significant time in the market without any major issues. We think the brand’s reputation and history are an intangible asset advantage, because the cost to a consumer of a fault could be huge.
Reliance has strong brand recognition and sales distribution for its SharkBite and Speedfit push-to-connect products. They are sold through more than 20,000 retailers in North America and are the main push-to-connect brands at Lowe’s and Home Depot. This relationship with these retailers also allows Reliance to distribute its other products.
As a first mover in the category, these brands are recognized and trusted by its target market. SharkBite’s recognition is such that it is used interchangeably to describe the category rather than associated as a brand within the category. This enables Reliance to continue to charge a premium for these products compared with competitors’ products that are not as recognized, or as widely distributed. The average cost of a push-to-connect product is about USD 10 or AUD 10. Except for knockoff products imported from China, most alternative brands are about the same price or up to 20% (or about USD 2 or AUD 2) cheaper than Reliance’s products. Consequently, we think most consumers are accepting of Reliance’s higher price over buying cheaper but newer or less recognizable alternative push-to-connect products that are not recognized for reliability.
The intangible asset advantage is further supported by the firm’s investment in research and development, and innovation. Reliance’s focus on innovation helps the company offset the impact of commoditization and the expiry of patented products to help maintain its product differentiation, reduce operating costs, raise margins, or improve product quality at low cost. Recent patented product innovations include EvoPex—push-to-connect fittings made from engineered plastic & stainless steel for the new construction market; SharkBite 2XL, which are large-diameter SharkBite for the commercial repair market; and SharkBite Max, a stronger version of SharkBite that can resist high pressures. Reliance’s acquisition of John Guest in 2018 brings the leader in plastic push-to-connect fittings into the Reliance fold. This business is a leading behind-the-wall cross-linked polyethylene, or PEX, and plastic fitting player in the UK and benefits from proprietary technology and strong branding including the Speedfit brand.
Although the acquisition of UK company John Guest in 2018 for AUD 1.2 billion has had a dampening effect on return on invested capital, group ROIC, including goodwill, remains above the weighted average cost of capital, averaging 15% over the next decade. We estimate it to improve to preacquisition levels by the end of our 10-year forecast period, providing the firm does not make any ROIC-dilutive investments. ROIC has been above WACC since 2016, when the company listed on the Australian stock exchange.
Although other brands have similar products, the push-to-connect category is about 15% of the US fittings market, of which we estimate Reliance’s share is about 85%, from 80% a decade earlier. In 2014, this category had about 10% of the US fittings market, but increased demand for housing construction and repair and renovation over the pandemic period has increased the market share for the category. We think this will continue to expand, due to aging housing stock in the US necessitating more repairs and renovations, with about half of all houses 40 years or older. In the UK, there are three major players in the push-to-connect category, and each player has about one-third market share. The smaller Australian market is more competitive and we estimate Reliance has about one fifth of market share in this region.
Overall share for the push-to-connect category has been increasing due to several factors. This includes the adoption by younger plumbers because it saves them time on the job, and increased adoption by DIY customers as a reliable alternative to calling in a plumber for a small repair or maintenance job. Additionally, the plumbing community is generally slow to adopt new technology, but Reliance’s time in the market without any material faults supports the adoption from older plumbers who would traditionally use crimping or soldering. We think most plumbers have some push-to-connect products in their truck for use when they are in a hurry, a pipe location is too tight for easy access, or the area is wet, meaning soldering cannot be done safely. Another trend in the US is the quality of plumbers, with large-scale projects likely to have a team of low-skilled and inexperienced workers that are supervised by a qualified plumber. In this case the project is likely to use push-to-connect products because it requires less supervision than traditional pipe-connecting methods.
Our fair value estimate for Reliance Worldwide is AUD 5.70 per share.
Fair Value and Profit Drivers
Demand for behind-the-wall plumbing products is correlated with residential and commercial renovations, maintenance, and improvement activity. We anticipate a softening in residential and commercial construction activity, before more supportive macroeconomic conditions lead to an improvement in demand and operating margins over the second half of fiscal 2027. We expect near-term profit margins will likely be supported by cost reductions, efficiency, and positive mix shifts to higher-margin products or geographies.We forecast a 10-year revenue CAGR of 6%. This is derived from our forecasts for repairs and renovations, and new residential construction in the group’s key geographies contributing low-single-digit volume growth, price increases aligned with inflation, and market share gains as the group’s innovative products(such as push-to-fit) continue to take market share in the overall plumbing category. We expect margins to fluctuate through the cycle with EBITDA margins tied to volume. Our fiscal 2026 adjusted EBITDA margin forecast of 18% represents trough margins, with fiscal 2026 lower volumes representative of households tightening their belts in response to high interest rates and consequently delaying discretionary repairs and renovations. However, we expect a recovery in volumes, and mix shift to higher-margin products over the second half of fiscal 2027. From here we expect margins to gradually increase to our midcycle EBITDA margin assumption of 26%, which is reflective of higher volumes, a mix shift to higher-margin products, and operational improvements — such as moving some SharkBite manufacturing to the US from fiscal 2024. We expect plumbers and homeowners to increasingly adopt push-to-connect plumbing for remodeling, maintenance, and improvement work. Trends driving this include a younger and less experienced plumbing workforce and an increase in do-it-yourself plumbing supported by online assistance such as blogs and how-to videos. We forecast push-to-connect market share in the plumbing fittings category to increase to about 25% from 15% in the US over the coming decade.We apply an 8.6% weighted average cost of capital to our cash flow forecasts to arrive at our fair value estimate. Our WACC reflects a 9.0% cost of equity and a 6.5% cost of debt.
We assign a Medium Morningstar Uncertainty Rating to Reliance.
Risk and Uncertainty
Medium
A potential risk is a prolonged downturn in residential spending, including repair and remodel and residential construction, which contributes most of the group’s earnings. Repair and remodel spending is more resilient than new construction, but still moves in the direction of the broader economy, and a downturn would likely weaken the company’s financial performance. That said, we expect Reliance’s US segment to continue to take market share through the cycle due to its economic moat sourced from brand intangible assets. Its brand is underpinned by the awareness and reputation of SharkBite, which has vast retail and wholesale distribution. Most of Reliance’s other plumbing products are more commoditized and we expect lower sales volumes at low points in the cycle as customers choose alternative cheaper brands.
We also believe demand for residential construction remains high in the group’s main geographies of the US and Australia. We forecast a gradual recovery in the residential sector over 2027, in line with expected interest-rate cuts. In the US, about half of all houses are 40 years or older, underpinning demand for repairs and renovations.
A further risk is the commoditization of plumbing products. Push-to-connect is the firm’s most differentiated product but even here there is competition as SharkBite and John Guest’s original patents have expired, and copycat products are readily available. However, the firm continues to innovate in this category and we think the stronger SharkBite Max product, released in 2023, is likely to command higher prices. We also think the risk of commoditization in the push-to-connect category is contained through the group’s large market share in the US, owing to its first-mover advantage as the original manufacturer of brass push-to-connect and a multidecade reputation with no at-fault issues.
We assign Reliance a Standard Morningstar Capital Allocation Rating.
Capital Allocation
We consider its balance sheet sound, its investment efficacy is fair, and shareholder distributions are appropriate.
We view Reliance’s plans to allocate capital to new product development and product enhancements as a long-term positive as it offsets the impact of commoditization, helping the business to maintain market share, pricing, and long-term operating margins. However, in recent years, spending on acquisitions has outstripped product development spending. Since 2017 the firm has acquired four businesses, for a combined cost of about AUD 2 billion. The largest of these was the acquisition of John Guest in 2018 for AUD 1.2 billion, equivalent to about half of Reliance’s market capitalization at the time. The acquisition is strategically sound, given the cross-over between the two companies and realized cost synergies exceeding management guidance. It has significantly increased the group’s exposure in the EMEA region, with segment EBITDA growing from less than USD 1 million in fiscal 2017 to USD 88 million in fiscal 2023, or about one third of adjusted EBITDA.
Reliance’s balance sheet is sound. The company had a net debt position of USD 330 million at the end of June 2025. Net debt/EBITDA was 1.3 in June 2025, comfortably under management's target range of 1.5-2.5. We expect a gradual deleveraging, driven by healthy free cash flow generation and our expectation of management’s prudent approach to capital management.
Reliance’s shareholder distribution strategy was updated in the middle of fiscal 2024 due to reduced capacity to generate future franking credits, with most corporate tax paid outside of Australia. The new strategy is to distribute 40%-60% of annual net profit after tax, split approximately equally between cash dividends and on-market share buybacks. We view this policy as appropriate.
