Bapcor Ltd (ASX: BAP) has revealed another strong update of growth in FY21. Will Bapcor shares rise in response?
Bapcor is the largest auto parts business in Australia and New Zealand. It owns and operates some of the largest chains of car part businesses such as Burson and Autobarn.
What was in the update?
The auto parts business said that it has continued to perform strongly since the October update.
In FY21, for the five months to the end of November, total revenue is up 26%. The net profit after tax (NPAT) has benefited from operating leverage with lower expenses in areas such as travel and other areas of discretionary expenditure, as well as lower interest rates and the contribution from Truckline which was not included in the prior corresponding period (pcp).
Bapcor said that in the first half of FY21 it anticipates it will achieve revenue growth of at least 25% compared to last year with net profit after tax of at least 50% compared to last year.
Management noted that market consensus for Bapcor’s full year net profit after tax currently ranges from $110 million to $115 million, which may not be unreasonable. However, considering the uncertain economic conditions, Bapcor will update the market about full year expectations when it releases its half year results in February.
Darryl Abotomey, the Bapcor CEO and Managing Director, said: “We are very pleased with the strong performance of Bapcor’s businesses. Trade and wholesale represent over 80% of Bapcor’s business, with retail [being] circa 20%. Historically, trade focussed businesses perform solidly in difficult economic conditions which is again borne out by Bapcor’s current performance.”
Bapcor said that a new Autobarn store format has helped revenue grow around 40% compared to last year. Improvements to its online capabilities also helped, as well as revitalised catalogues, expanded product ranges and the continuing rollout of new stores.
It said that construction of the new Victorian distribution centre is progressing well and the building is expected to be done in Feburary 2020 with the automated picking system operational in the following six months. Bapcor believes this will deliver significant operational benefits.
Summary thoughts
Bapcor is doing really well in this environment. I think it’s an impressive business. The Bapcor share price has recovered strongly since the lows in March, but there could still be some value – particularly if it grows well in Asia with its Burson business.
However, over the long term I’m cautious about the shift to electric vehicles. So, I prefer other ASX growth shares such as Pushpay Holdings Ltd (ASX: PPH).