Bapcor’s solid FY21 result was weighed down by weak cash flow (inventory build) and relatively muted outlook, with management aiming for “at least” flat earnings growth in FY22.
Retail earnings margin of 15.4% was down 4.2ppts on the first half which management attribute to a focus on competitive pricing. Cash flow was also weak (74% conversion), due to $45m of inventory investment to buffer.
After incorporating the impact of the AASB16 lease standard, Credit Suisse forecasts large revisions at the earnings level, but at the earnings per share (EPS) level the broker’s changes are more modest reflecting a broadly unchanged operational outlook.
Outperform rating is unchanged and the target is lowered to $9.20 from $9.25.
Sector: Retailing.
Target price is $9.20.Current Price is $7.72. Difference: $1.48 – (brackets indicate current price is over target). If BAP meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).
