Eagers Automotive Limited (APE)
HOLD

Plugged in

 23 Feb 2023
Sector: Consumer Discretionary

FY22 RESULT

Need To Know

  • Pretax profit $405m, 3% ahead of consensus
  • Guiding to revenue $9.5-10bn +15% in FY23, ahead of consensus forecasts
  • Final dividend 49cps fully franked, payment 31 March

Australians are ignoring Energy Minister Bowen and are continuing to buy lots of new and used ICE vehicles. Eagers Automotive is ready for when customers start buying more EVs, but that is for later.

APE’s order bank continues to grow. Despite long waiting times for delivery, customers are still placing orders and waiting patiently for new vehicles. Cancellations are almost non-existent. Delivery times are improving gradually. One reason for the stickiness of order growth is the introduction of new models that are proven winners for the top manufacturers, such as the Toyota LC300 and the Ford Ranger. APE’s new car order bank grew 74% in FY22.

APE revenue guidance for FY23 is $9.5-10bn, buoyed by the momentum carried through from 2H22. The target is 15% growth on FY22 whereas the market had been thinking +6%. Part of the growth is due to new partnerships such as BYD and Cupra. Other growth areas include acquisitions and EasyAuto123. 

Australian EV sales almost doubled in 2022 but are still a small proportion of the total market. APE is well placed to benefit given its strong relationship with top Chinese manufacturer, BYD.

Used vehicle sales will remain a core part of the business. About 3m used vehicles are traded each year in Australia and APE has a strong position in the market across its dealerships.

APE acquired a further $148.3m of property in FY22 taking its total portfolio to $607.6m. The company exited 22 leases during the year in addition to the 96 exited in FY20-21. APE now owns 21.4% of its total property exposure. 

The final dividend of 49cps was a decent bump up from last year taking the full year dividend to 71cps.

Investment View

APE is the leading auto retailer in Australia but has not been sitting in neutral. The transition to EVs may be a slow burn in Australia for now, but APE has prepared well for the future. Meanwhile, the yawning gap between ordering a new vehicle and actually receiving it has not deterred customers at all. Orders have been robust and delivery times are improving as logistical bottlenecks improve.

The lift in revenue guidance is a confident signal from APE, but we have one eye on rising interest rates and falling consumer confidence.

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Stock Overview

Share Price

Company Overview

Eagers Automotive is one of Australia’s largest new and used car dealership groups with approximately 11% market share. It also has dealership groups in New Zealand.

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