Equity Analysis /
Australia

AU : Eagers Automotive - Ideal supply/demand conditions continue

    Josephine Little
    Josephine Little

    Senior Analyst - Consumer Discretionary

    CGS-CIMB
    18 April 2021
    Published by

    APE provided a strong trading update, reporting 1Q21 underlying PBT of A$98m (+143% yoy). APE continues to benefit from favourable supply/demand dynamics across the industry, bolstered by internal cost out strategies implemented in 2Q20. While supply constraints continue, they clearly aren’t severe enough to be impacting deliveries; while forward orders also remain strong. We make meaningful (+27%) upgrades to our FY21 PBT forecasts and risk lies firmly to the upside should current conditions continue over the balance of CY21. Longer-term, we believe APE’s Next 100 strategy (capital recycling/EasyAuto123 used car strategy/Auto Mall) will further assist the growth profile. We also see the likelihood of APE using its strong balance sheet to target strategic acquisitions over the medium term. ADD maintained with a revised A$16.86 price target.