How is the Business Trending on this Stock in Consumer Discretionary Space- PWR?
Peter Warren Automotive Holdings Limited
PWR Details
Quarterly Balance: Peter Warren Automotive Holdings Limited (ASX: PWR) is a motor vehicle dealer company in Australia. As per the quarterly balance news on 4th March 2022, PWR was added into All Ordinaries Index, effective from 21 March 2022.
Insights of 1HFY22: During 1HFY22, the company achieved exceptional results despite some challenging conditions, evident by decent growth in sales and gross profit.
Financials (Source: Analysis by Kalkine Group)
Key Risks: The company’s operational and financial performance could be impacted by the rising market share of peers in the industry in which it operates. In addition, the business could also be affected by the instability of demand and supply.
Outlook: Overall, PWR is optimistic about earnings’ sustainability for FY22, with a strong order book, expected improvements in new vehicle supply and underlying demand expected to remain positive on the back of strong consumer savings. Though, some downward pressures on new vehicle margins are anticipated in the period to 30 June 2022, while a resilient operating model backed by geographic and brand diversity keeps the company into a well condition for its continued OEM reforms. The Penfold Motor Group acquisition completed in December 2021, will contribute to the performance in the second half of FY22.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of PWR is trading near to its 52-week low level of $2.300, offering a decent opportunity for accumulation. The stock has been corrected by ~7.41% in the past one month. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average P/E multiple, considering COVID-19 uncertainties and higher debt to equity ratio than industry median, etc. For the purpose of valuation, peers such as Eagers Automotive Ltd (ASX: APE), Bapcor Ltd (ASX: BAP), and Autosports Group Ltd (ASX: ASG), and others have been considered. Considering the expected upside in valuation, growing sales, rising PBT, optimistic outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $2.500, down by ~0.399% as on 24 March 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
PWR Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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