Credit Suisse believes that 4WD/PU penetration is a long-term structural growth story for ARB Corporation in both Australia and offshore.
Credit Suisse thinks that first half FY22 sets up well given the strong order book, favourable forex, and the contribution from Truckman acquisition. But the broker believes the visibility beyond this remains low and sees some risk to end-demand as international travel resumes, which would likely be felt initially in key export markets such as the US.
Overall, the net outcome sees 22%, 26%, and 18% earnings per share revisions over FY21, FY22, and FY23 respectively.
The broker’s earnings changes largely reflect the flow-through of the higher FY21 base post today’s update, plus a less aggressive demand fade-away given the solid order book heading into 1H22 and continued FX benefit.
Neutral rating is retained and the target price increases to $44.40 from $37.00
Sector: Automobiles & Components.
Target price is $44.40.Current Price is $44.68. Difference: ($0.28) – (brackets indicate current price is over target). If ARB meets the Credit Suisse target it will return approximately -1% (excluding dividends, fees and charges – negative figures indicate an expected loss).
