Eagers Automotive: Deliveries set to sail once port congestion frees up

About the author:

Author name:

By Scott Murdoch

Job title:

Senior Analyst

Date posted:

25 May 2023, 7:30 AM

Sectors Covered:

Diversified Financials, Professional Services

• Eagers Automotive (ASX:APE) provided a trading update to April-22: revenue +9%; U-PBT flat on pcp. Revenue growth has been supported by acquisitions, however supply chain issues (port delays) have impacted the core business (LFL new car deliveries down ~7%).
• Gross margins remain strong, but broad cost pressure is evident which APE is offsetting with structural cost-out initiatives. FY23 revenue guidance (>A$1bn incremental revenue) was reaffirmed.
• The order book continues to grow (in part aided by delivery constraints), with a >two-year run-off expectation. We expect demand (softening as expected) to broadly hit equilibrium with supply in 2HCY23.
• Whilst underlying earnings are flat to-date, the fixed cost nature of the business should see meaningful earnings growth in 2H23.
• Add rating maintained. APE is executing on building a sustainably higher earnings base via further consolidation, ongoing efficiency, and new OEM strategies.

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