Citi has downgraded ARB Corporation to a “neutral” rating, citing concerns over declining Australian aftermarket sales. The downgrade reflects the view that ARB is facing both structural and cyclical headwinds in its domestic market. ARB Corporation specialises in the design, manufacture, and distribution of 4×4 accessories. They are a prominent player in the automotive aftermarket industry.
According to Citi analyst Sam Teeger, while the company’s US operations show promise, they are currently insufficient to compensate for the weaker performance in Australia. This assessment has led to a cautious outlook on ARB’s near-term prospects, pending evidence of effective measures to address the domestic sales decline.
As a result of these concerns, Citi has revised its financial forecasts for ARB. Sales forecasts have been cut by 2 per cent across financial years 2026 to 2028. Net profit estimates have also been reduced, ranging from 1 per cent to 11 per cent, reflecting expectations of lower margins and softer sales in the coming years.
In line with the revised outlook, Citi has significantly reduced its price target for ARB, slashing it by 50 per cent to $22.05. The broker also removed ARB’s valuation premium, noting that the stock’s current trading multiple of approximately 20 times FY26 earnings warrants demonstrable progress in addressing engineering capacity, marketing investment, and car parc mix challenges before a re-rating towards its historical 30 times multiple can be justified.
