Super Retail Group Limited

SUL Details

Half Year Results (Period ended 26^th December 2020)

Decent Results: The company has reported first half financial performance which was characterised by the robust top-line growth, higher gross margin as well as robust operating leverage. The company’s online sales witnessed a rise of 87% to $237.4 Mn, which implies 13% of the Group sales. Notably, Click & Collect represented 45% of the company’s online sales. Also, Group segment EBITDA rose by 95% to $311.4 Mn.

Robust Growth in NPAT: The company has stated that its statutory NPAT rose by 201% to $172.8 Mn and its Underlying NPAT increased by 139% to $177.1 Mn. It has also declared fully franked interim dividend amounting to 33.0 cps. Its operating cash flow (pre-AASB 16) amounted to $420 Mn, which was $180.9 Mn higher than the pcp.  

Online Sales (Source: Company Reports)

Recent Updates

• Declaration of Results: SUL is expected to release its FY 2021 results on 18^th August 2021.
• Appointment of Company Secretary: In the release dated 31^st May 2021, SUL stated that Kelly Head has been appointed to the post of additional Company Secretary. Notably, Rebecca Farrell would be continuing in the role of Company Secretary.
• Trading update for First 44 Weeks of FY 2021: The company stated that, considering the continued strength of the customer demand, it decided to maintain relatively subdued levels of the promotional activity in H2. Resultantly, the gross margin improvement that was delivered in H1 was maintained in H2.

Trading Information (Source: Company Reports)

Outlook

The company’s corporate strategy revolves around the 3 primary value levers: 1) Growing the annual customer value, 2) To be an efficient omni-retailer, as well as 3) Focusing towards organic growth along with the capital discipline. The company has stated that the active club membership growth is surpassing the store growth.

Key Risks

The company is exposed to the risks related to the COVID-19. The lockdowns could force the company for store closures as well as there could be a downturn in the tourism and travel. Also, there could be some fluctuations in the level of demand.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart:

Source: REFINITIV; Note: Purple Color Line Reflects RSI (14-Period)

On the daily chart, SUL stock prices are hovering near its horizontal trend line resistance zone at AUD13.69 and prices are sustaining below the trend line. Furthermore, the momentum oscillator RSI (14) is trading at ~65.03 level and formed a negative divergence indicating a possibility of downside correction from the current level. A crucial support level for the stock, is placed at AUD12.84, while the key resistance level is placed at AUD13.69.

Stock Recommendation

The stock price of the company witnessed a rise of ~66.5% in 1 year as well as ~16.8% in 6 months. It has made a 52-week low and high of $7.590 and $13.650, respectively. The stock is trading towards the 52-week higher levels.

We have valued the stock using EV/Sales multiple-based illustrative relative valuation and have arrived at a target price that reflects a decline of low double-digit (in % terms). We have applied a slight discount to EV/Sales Multiple (NTM) (Peer Average) considering lower current ratio as well as risks associated with the COVID-19.

Thus, we advise the market players to book profit on the stock and wait for a better entry levels. Hence, we give a “Sell” recommendation on the stock at the current market price of $13.69 as on July 27, 2021, at 3.17 PM (GMT+10), Sydney, Australia

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.

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