The Bapcor Ltd (ASX: BAP) share price has steadily grinded higher this year, currently up 20% year to date. While the COVID-19 pandemic and resulting government imposed restrictions in Australia, New Zealand and Thailand had an adverse impact on its financial performance in FY20, the business expects to bounce back strongly in FY21.
Resilient FY20 performance
Despite the circumstances, Bapcor delivered a resilient FY20 performance with proforma earnings before interest, taxes, depreciation and amortisation (EBITDA) down 4.1% and proforma net profit after tax 5.5% below the record earnings achieved in FY19.
Looking ahead, the company believes the fundamentals of the vehicle aftermarket are as strong as ever. COVID-19 has resulted in record sales of second hand vehicles as travellers sought social distancing and moved away from public transport. According to Bapcor, there is also the likely flow-on effect of more people spending their holidays domestically utilising their vehicles.
FY21 trading update
Last week, Bapcor provided a pleasing first quarter FY21 trading update in which revenue for the first five months to the end of November was up 26% on the prior corresponding period (pcp).
For the first half of FY21, the company anticipates it will achieve revenue growth of at least 25% over the prior corresponding period. It also expects net profit after tax to increase by at least 50% over the pcp which was $45.6 million.
In the update, Bapcor also reported that the construction of its new Victorian Distribution Centre is progressing well. The building is expected to be handed over in February 2021, and an automated picking system operational in the following six months.
This update was well received as the Bapcor share price jumped as high as 10% on the day of the announcement. However, Bapcor shares were unable to hold onto all of the day’s gains and closed just 3% higher.
Upgraded Bapcor share price after trading update
Citi has raised its Bapcor share price target from $8.80 to $8.85 and retains its buy rating. The broker was pleased with the company’s trading update to the end of November but expects group sales to slow to 23% growth in Q2 compared to 27% in Q1. It rates Bapcor as a top pick in the automotive sector.
Macquarie Group Ltd (ASX: MQG) has raised its Bapcor price target from $8.50 to $8.75 and retains an outperform rating. It notes strong trading across all business segments and expects solid growth to continue.
Morgan Stanley has raised its price target for Bapcor from $8.45 to $9.00 with an overweight rating. The broker says that further upgrades may follow as trends in auto spending continue.
UBS Group retained its buy rating with a price target of $8.55. The broker upgraded its expected FY21 NPAT to $120 million, above Bapcor’s own guidance range.
Credit Suisse was the only broker to lower its Bapcor share price target from $8.75 to $8.60 despite retaining its outperform rating. Its commentary was also positive, saying sales growth as reported in November was better than expected.
