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Highlights

  • Propel shares have dropped 24% in 2025, but Macquarie maintains an ‘outperform’ rating.

  • FY25 guidance points to slight organic volume decline, offset by acquisitions.

  • Macquarie sets 12-month price target at $5.66, implying 27% upside.

Shares in funeral services provider Propel Funeral Partners Ltd (ASX:PFP) have fallen 24% so far in 2025, but investment bank Macquarie has maintained a positive outlook on the company, citing long-term industry fundamentals and acquisition-led growth potential.

Propel, which is the second largest provider of death care services in Australia and New Zealand, operates funeral homes, cemeteries, and crematoria. The company is known for its acquisition-led growth strategy, serving as a succession option for independent operators in the sector.

Macquarie noted that Propel’s FY25 volume guidance ranges between 22,300 to 22,700 services, representing a 3.9% year-on-year increase at the midpoint. This growth is primarily attributed to recent acquisitions. However, organic volumes are forecast to contract by between 1.25% and 2.75% in FY25, driven by a projected second-half decline of 3.5% to 5.5%. In contrast, the first half of FY25 saw organic volume growth of 1%.

The broker described the volume projections as broadly aligned with current industry data and noted that short-term fluctuations in death volumes are typical. It expects the contraction to be temporary, highlighting that Australia and New Zealand are entering a period of “peak death growth rates,” which supports a positive long-term outlook for the sector.

On the financial front, Propel’s FY25 operating profit (UEBITDA) is guided between $54 million and $56 million, equating to a margin of 24.5% to 24.9%. While slightly below Macquarie’s expected range of 25% to 27%, the result is still considered stable by the broker.

In terms of mergers and acquisitions activity, Propel has completed around $13 million worth of acquisitions in FY25 to date, a significant drop from the record $97 million in FY24. Despite this, Macquarie highlighted that the company’s acquisition pipeline remains "healthy" and that it is well-capitalised with approximately $140 million in available capacity to pursue further opportunities.

Macquarie emphasised Propel's competitive positioning, pointing to its decentralised operating model and the absence of regulatory hurdles, given its relatively low market share of around 10% versus industry leader InvoCare’s share of over 20%.

Based on its analysis, Macquarie has reaffirmed its ‘outperform’ rating on Propel and issued a 12-month price target of $5.66, suggesting a potential upside of approximately 27% from current levels. The broker described the recent share price weakness as an “aggressive sell-off,” but maintained that the company’s fundamentals and acquisitive growth potential offer material upside over the long term.

Propel shares are currently trading at an estimated 24 times FY26 earnings, according to Macquarie's valuation.