Equity Analysis /
Australia

AU : Super Retail Group - Super profits

    James Barker
    James Barker

    Research Analyst

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    Josephine Little
    Josephine Little

    Senior Analyst - Consumer Discretionary

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    CGS-CIMB
    18 January 2021
    Published byCGS-CIMB

    SUL issued a 1H21 trading update above our/consensus forecasts. Group total/LFL sales growth was 23%/24% for the half, which implies a broad continuation of LFL trends reported at the AGM. A strong GM and opex leverage will see SUL report 1H21 EBIT of A$253-256m (+119-122% yoy) and underlying NPAT of A$174-177m (+135-139% yoy). Guidance is set on a pre-AASB16 basis and includes no JobKeeper benefits. EPS forecasts +34% in FY21 and +8% in FY22/FY23. We currently forecast FY22 earnings to fall materially on the inflated FY21 period, although highlight forecasting earnings is far more difficult than normal given the various COVID moving parts. SUL’s brands offer direct exposure to the strong domestic consumption tailwinds currently at play. While timing is uncertain, demand/earnings will normalise from current elevated levels (but potentially at a higher base than prior to COVID). Based on our FY22 forecasts, SUL is trading on c14x. Hold rating and A$12.57 price target.