JBH is an electronic goods retailer in Australia. The company sells consumer electronics, car sound systems, heating and kitchen appliances, among others. It operates through JB Hi-Fi Australia, JB Hi-Fi New Zealand, and The Good Guys segments.

H1FY22 Financial and Operational Summary:

• Through website upgradation and investment in distribution centres, it had clocked an online sales growth of 62.6% in H1FY22 over the prior year and online sales accounted for 22.7% of total sales.
• It had reaped benefits of a diversified fulfillment model and maintained a high level of customer satisfaction and on-time delivery which resulted in increased volumes.
• But overall sales plunged 1.6% to reach $4.86 billion owing to store closures.
• Its EBIT dropped 9.1% to $420.5 million due to the increased cost of doing business in Australia.
• New Zealand business showcased a contraction of 4.5% in net sales over PcP.
• The Good Guys vertical dropped by 0.8% to $1.44 billion but sales momentum was strong in consumer electronics and home appliances products.
• The board has declared an interim dividend of 163 cents per share fully franked which represents 65% of NPAT. The interim dividend will be paid on March 11, 2022.
• JBH to commence off-market buy-back of up to $250 million. Through the interim dividend and share buy-back, JBH will return $437 million to shareholders.

Key Risks: Changing customer preferences may affect buying habits. The company’s products are highly discretionary in nature. An increase in interest rate may influence consumer spending.   

Outlook:  JBH posted a 3.6% increase in comparable sales from January 1, 2022, to January 31, 2022. This was despite COVID-19 headwinds and supply chain woes, The start of the year showcased heightened customer demand.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

JBH Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: The stock of JBH has delivered returns of +~14.61% in the past month. It is trading higher than the average of the 52-week high low range of $54.640-$43.120. The stock has been valued using the P/E multiple-based illustrative relative valuation method and arrived at a target price with a correction of single high-digit (in percentage terms). The company can trade at a slight discount compared to its peers, considering the supply chain disruptions on account of the pandemic. For valuation purposes, peers like Harvey Norman Holdings Ltd. (ASX: HVN), Metcash Ltd. (ASX: MTX), Super Retail Group Ltd. (ASX: SUL), and others have been considered. Given the recent rally in share price, current trading levels and valuation indicating downside, and key business risks, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $52.590, as of 14 February 2022, 11:47 AM (GMT+10), Sydney, Eastern 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 for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.