The ARB Corporation Limited (ASX: ARB) share price is up more than 5% after a FY21 half year update.
The market update
ARB announced that it achieved unaudited sales revenue of $284 million for the half year ended 31 December 2020. This represents growth of 21.6% compared with the prior corresponding period.
Based on preliminary, unaudited management accounts, ARB expects profit (before tax) for the period to be within the range of $70 million to $72 million. This includes $9.8 million of non-recurring government benefits.
This announcement follows a previous positive update in October, when the company said it had excellent growth in export markets.
ARB expects to release its half year results on 16th of February.
Short-term outlook
ARB management have a positive short-term outlook, with a strong customer order book and another record sales month in December 2020. However the company stressed that its first half performance should not be used as an indicator for the second half of FY21.
The company stated that no guidance can be provided for the second half of FY21 as it remains far too uncertain to predict in the current economic climate.
Are ARB shares a buying opportunity?
Many companies related to discretionary spending are showing strong results through these very strange times, seemingly booming because of government stimulus and the redirection of discretionary spending away from international travel. I’m unsure whether ARB will be able to maintain this level of growth that it is seeing in the current discretionary spending phenomenon.
Can ARB continue to deliver increasing growth over the long term? I think that this growth will be hard to beat in FY22 and potentially difficult to maintain current revenue as government stimulus weans away. I am happy to sit out and watch other investors ride the wave for this one. I tend to agree with ARB management when they stressed that it remains far too uncertain to predict in this environment.
Other ASX growth shares in the auto parts space could be worth looking into such as Bapcor Ltd (ASX: BAP).