We Expect Bapcor to Continue to Capture Share in a Fragmented Industry

We lower our fair value estimate for Bapcor to AUD 6.60 from AUD 7.10 following the transition to a new analyst. The reduction to our fair value estimate is principally due to lower top-line growth assumptions. The firm's trade businesses in Australia and New Zealand, which contribute the majority of consolidated earnings, enjoy competitive advantages over smaller peers in the highly fragmented automotive parts industry, underpinning Bapcor's narrow economic moat rating. Our Standard stewardship and medium fair value uncertainty ratings remain intact. We forecast an EPS CAGR of 8% over the five years to fiscal 2024 as continued expansion of the firm's store network and the increasing fleet of vehicles on Australian roads more than offset near-term headwinds from the coronavirus and the dilutive impact of the recent equity raising. Last trading at a discount of 11% to our updated fair value estimate, shares in Bapcor screen as undervalued.