Smartgroup Corporation Ltd (ASX: SIQ) could be an ASX 300 share to buy.
That's the view of analysts at Bell Potter, who are recommending the salary packaging company's shares to clients this week.
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What is the broker saying?
Bell Potter notes that a trading update reveals that new vehicle order trends have improved, which bodes well for the ASX 300 share. It said:
New vehicle order growth has accelerated for the first time since the introduction of the Electric Car Discount Policy. SIQ reaffirmed mid-40s EBITDA margin guidance, delivering 1Q26 settlements which grew +7% on the pcp and orders +22%. This follows gradual convergence. While the revenue run-rate was unchanged, backlogs are re-emerging to support future periods. We see good potential as delivery times improve further. We had been cautious about the impact from sunsetting exemptions (plug-in electric hybrids). However, SIQ absorbed this, and we upgrade settlements.
In light of this, the broker believes that Smartgroup's outlook is now in better shape. It adds:
The trading update featured firmer outlook language. Last year the run-rates had modest improvement and management were cautious but optimistic. Looking ahead, operating conditions remain favourable, with positive demand drivers. SIQ highlighted that 80% of battery electric vehicle orders are less than $75k; 88% below $80k. Under proposed policy changes (effective 1 April 2027), the full tax exemption would remain available for battery electric vehicles priced under $75k.
We view this de-risking the outlook of further dampening demand. Supply timeframes on average reduced from 31-24 days. This marks normalisation back to pre-covid conversion rates. Most of the improvement has been driven by internal combustion engines. Turnaround times for both traditional and battery electric vehicles now stands at around 24 days. Required expenses are unchanged with guidance for $11-13m intangible purchases.
ASX 300 share upgraded
According to the note, Bell Potter has upgraded Smartgroup's shares to a buy rating with an $11.50 price target (from $9.30).
Based on its current share price of $10.19, this implies potential upside of 13% for investors over the next 12 months.
In addition, the broker is expecting the company to provide a generous dividend yield of 5.8%. This lifts the total potential return to almost 19%.
Commenting on its upgrade, Bell Potter said:
We upgrade our recommendation to Buy, reflecting +8%/+9%/+10% EPS upgrades. SIQ has performed well, lifting install base growth, with modest penetration. Renewed vehicle orders and pipeline revenue turn us positive. Our revised target price equates to 15x blended earnings, similar to the environment in which leasing demand took off.
