Inter Cars - 3Q19E financials
We maintain our LT fundamental Buy rating as well as ST market-relative Overweight bias for IC’s shares. An update of our financial forecasts for the Company results in a downgrade of 12M EFV to PLN 247.2 per share, 5% below our previous target at PLN 260.6 per share.
We expect decent 3Q19 financials supported by the top line growth and better yoy gross margin on sales, as a result of the strategy implemented and last year’s low base. Nevertheless, we expect much higher yoy net financial costs (FX losses in 3Q19 vs profits in 3Q18). Thus, we assume a flattish yoy NP line in 3Q19. We cut down our expectations for NP this year among others due to implementing the IFRS16 standard (a PLN -8 million impact) and assuming one-off costs for restructuring (PLN -10 million impact).
We expect the Company’s further top line growth next year as the strong demand for the car spare parts continues in the region. The Company’s profitability should be supported by several changes enforced in the organization this year, such as: (i) the launch of the pricing project with the product prices growth as a result, (ii) drop of the number of suppliers helping to improve the inventories rotation cycle, (iii) limiting the marketing actions, (iv) cutting off the projects with negative ST profitability, (v) keeping flat the number of affiliates in Poland and thus the fixed costs level, and (vi) launch of the suppliers financing program. We project the Company’s FY20 NP at PLN 283 million, up 21% yoy.
Inter Cars is an automotive spare parts distributor for passenger cars, commercial vehicles and trucks in Middle-Eastern Europe. The product range of Co. reaches over one million different automotive spare parts for passenger cars and trucks. No matter if the car is European or Asian one, Co.'s customers can find full range of products for their cars as well as all the necessary tools and garage equipment. Besides spare parts distribution, which is the core business of Co., Co. is also an exclusive distributor of legendary motorcycle brand “TRIUMPH” in Poland (via motorcycle distribution network, called Inter Motors) and distributor of spare parts and accessories for other motorcycle brands.
BOS Brokerage, with over 20-year experience, offers brokerage services on the Polish capital market to satisfy numerous needs of institutional and retail investors.
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