Equity Analysis /

AU : Peter Warren Automotive - Plenty of torque in the margins

    Scott Murdoch
    Scott Murdoch

    Analyst - Contractors & Developers

    27 August 2022
    Published byCGS-CIMB

    PWR’s FY22 underlying NPAT of A$61.7m was up 18% on the pcp, beating expectations. With the inclusion of PMG, 2H22 NPAT (A$36.3m) was up 43% HOH. Strong gross margin was again a driver. PWR’s 2H22 GM of 20.8% (+170bp HOH) was partly the Mercedes shift to Agency (+70bps) and cyclical strength (+100bps). PWR’s order book closed +55% HOH, with demand continuing to outstrip supply (continuing into 1H23). We expect this is ~5mths of embedded new vehicle orders. Demand/supply imbalance continues to drive strong margin outcomes for the sector. We are conscious of the operating deleverage impact when GM ‘normalises’, however more constrained supply is likely to persist for some time. PWR is trading on ~7x FY23 PE and ~10x our assumed ‘more normalised’ conditions (FY24/25). Industry consolidation will continue – we expect PWR to be a participant (primary growth driver), or even a potential target in time.