carsales.com Limited

Section 1: Company Overview and Fundamentals

1.1 Company Overview:

carsales.com Limited (ASX: CAR) is an online automotive, motorcycle and marine classifieds business in Australia. Its carsales network is an online shop for buying and selling cars, motorbikes, trucks, boats, and machinery equipment.

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~28.83% of the total shareholding. Bennelong Australian Equity Partners Pty. Ltd. and Aware Super hold a maximum stake in the company at ~8.11% and ~4.97%, respectively.

1.4 Key Metrics: The company has reported a net margin of around 125.6% in 1HFY23 compared to the year-ago figure of 30.9%. Further, the return on equity in 1HFY23 stood at 24.7%, up from 7.9% reported in 1HFY22. Below is captured the trend of the operating margin and current ratio:

Section 2: Financial and Operational Highlights

2.1 Financial Highlights for 1HFY23 (Period Ended 31 December 2022): In 1HFY23, the company recorded growth in its private segment in Australia, buoyed by advertising volume, delivery of new dynamic pricing initiatives and growth in Instant offers. Results revealed a flexible and diverse business model across multiple industries, geographies, and customer segments. During the period, CAR acquired the remaining 51% interest in Trader Interactive, thus strengthening its competitive position in all key markets.

2.2 Historical Performance: The company remains well-positioned to deliver long-term shareholder value via world-class capability, strengthening international growth in markets and investment in new products and services.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary:

The stock has witnessed a rise of ~2.8% in 3 months and over the last 9 months, it has increased by ~20%. The stock has a 52-week low and 52-week high of AUD 16.988 and AUD 23.590, respectively and is currently trading slightly above the average of 52-week high-low average.

4.2 Fundamental Valuation

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

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.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 24, 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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