A combination of falling car sales in the company’s categories and an appreciating Thai baht has meant ARB Corp now expects net profit to be weaker than the prior first half.
Despite a three-year period of negative revisions to earnings, albeit modest, Credit Suisse does not believe this is evidence of anything more structural. A meaningful turnaround in relevant vehicle sales and a step change in the outlook for offshore business is required nonetheless for any outperformance going forward.
The broker reduces estimates for earnings per share by -3-5% over FY20-22. Target is reduced to $16.80 from $17.40 and Neutral rating retained.
Sector: Automobiles & Components.
Target price is $16.80.Current Price is $17.55. Difference: ($0.75) – (brackets indicate current price is over target). If ARB meets the Credit Suisse target it will return approximately -4% (excluding dividends, fees and charges – negative figures indicate an expected loss).