Tight Supply and Strong Demand Drive Eagers' Strong Start to Calendar 2021

We maintain our AUD 10.50 fair value estimate for shares in Eagers Automotive following the release of interim fiscal 2021 results. Underlying profit before tax of AUD 219 million was preannounced in July 2021 (see our note "Eagers Has the Pedal to the Metal"), representing a fourfold increase on the prior corresponding period, or PCP, marred by coronavirus restrictions. While new vehicle sales were decimated in calendar 2020, particularly while restrictions were in place, sales have rebounded strongly as restrictions eased and government stimulus and pent-up demand flowed through. Australian new vehicle sales for the period are 28% higher than the PCP--a far cry from April 2020 lows where sales were nearly half that of the PCP.