We Expect Eagers' Margins to Moderate

We maintain our AUD 11 fair value estimate for shares in narrow-moat Eagers Automotive following the release of interim 2022 results. Underlying net profit after tax, or NPAT, of AUD 129 million was 19% below the prior corresponding period, or pcp. We continue to expect that a repeat of 2021—where the stars had aligned for Eagers—would be a tough ask. In 2021, Eagers enjoyed exceptional pricing power from the combination of constrained vehicle supplies due to supply chain issues for semiconductor chips, and elevated consumer demand as Australian consumers had excess savings from restrictions on leisure and travel activities due to lockdowns and border closures, further bolstered by significant fiscal stimulus. We lift our full-year NPAT forecast due to first-half margin durability by 4% to AUD 261 million—10% lower than the pcp.