Bapcor Ltd (ASX: BAP) shares had a shocker of a month in July, after the company pre-released its financial projections, which showed that revenue for the full year was expected to come in slightly lower than the previous corresponding period.
The stock fell more than 28% on the day and has barely recovered any ground since, placing the shares firmly in decent buying territory, according to Macquarie analysts.
Bapcor announced a net profit after tax of $28.1m in late August, up 117% from the previous full year due to lower significant items.
Revenue was 1.5% lower than the previous period, while the trade segment revenue was up 1.3%, and trade earnings were up 5.4% despite weaker-than-expected May and June trading.
Restructure to drive profitable growth
The company's executive chair and chief executive officer, Angus McKay, said that FY25 was "the start of the strategic re-set for the company, focused on simplifying our operations and reducing our cost base".
"We exited or relocated 70 sites including consolidating 23 smaller warehouses, opened 21 new branches/stores and three new state-based distribution centres.
"We continue to invest in upgrading our IT infrastructure and systems.
"While this activity caused considerable disruption to our operations which impacted trading performance, they were necessary to drive business simplification, drive a more customer-led business and strengthen the company's core business for future growth."
Bapcor fall presents opportunity
In a note to clients, Macquarie analysts have a neutral weighting on the stock but indicate it is good buying at the current level of $3.71 per share.
They have a price target of $3.85 per share on the stock, although they point out that given the disruption in the sector, there is little visibility on future earnings.
"Management remain focused on executing its strategic initiatives and given the level of disruption across the segments there is no earnings guidance for FY26, lowering visibility," Macquarie analysts said.
Macquarie said growth catalysts would be guidance given at the company's annual general meeting, "stabilisation and growth in each segment", and "delivery of medium-term targets".
"Net profit after tax is expected to be skewed to the second half of 2026 as benefits from strategic initiatives begin to deliver," Macquarie said.
Macquarie is expecting Bapcor to have a dividend yield of 2.8% in FY26, increasing to 4% the following year.
