Inter Cars: Let it grow… and make money (BUY - transfer of coverage)

Due to a change in analyst responsibilities, we transfer coverage of Inter Cars, with a BUY rating and a new 12M price target (PT) of PLN 455/share (offering 21% upside potential). Although the company has rallied by nearly 60% ytd, we still believe that the market has not pencilled in all the positive news. First, the spike in imports of older cars (average age of 12 years) into Poland in March and April, according to IBRM Samar, the Polish Automotive Market Research Institute, bodes well for IBRM Samar’s 1m import forecast for 2021E, creating a good outlook for Inter Cars. Second, the 1Q21 results proved that the company is able to maintain high margins. This, combined with the CFO’s assurance over possible further improvements in profitability in 2021E, has encouraged us to pencil in EBITDA of PLN 732m (+15% yoy), 21% above the consensus. Third, the combination of solid profits growth yoy and limited capex should result in deleveraging, with its net debt/EBITDA down from 1.7x as of end-2020, to 0.9x at end-2023E, on our numbers. Finally, we believe that Inter Cars is valued attractively, trading at our 2021E EV/EBITDA of 8.7x, 19% below its long-term average.