Inter Cars: Transition period approaching the end
We upgrade our rating on Inter Cars (IC) to BUY from Neutral. While a weaker than originally expected operating margin in 9M17 leads us to lower our 2017 NI forecast by 15% to PLN 240m, following an upgrade to sales estimates for 18E-20E, our bottom line forecasts are up 4-14% for the period. We now expect NI to grow at a healthy 16-20E CAGR of 14% (vs 10% before) to PLN 389m in 20E, which we believe has not yet been fully priced-in by the market. We note we expect 4Q17E to bring the first signs of an improvement in IC’s earnings and OCF, stemming from the launch of the firm’s new warehouse in PL (its operational optimization is close to an end). At the same time, while the company is likely to continue to pay dividends in the years ahead, we do not expect it to shine among its global peers in this respect in 18E-20E. Following the changes to earnings estimates for the years ahead, our FV for IC is up 12.1% to PLN 322.3, which implies 14.7% upside potential.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.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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