November Retail Trade, CPI Data Bode Well for the Retail Sector

Company Overview

Bapcor Limited (ASX: BAP) supplies auto parts, accessories, equipment, services, and solutions with headquarter in Australia. There are four segments within the company. To service and repair passenger and commercial vehicles, the trade segment provides automotive aftermarket parts and consumables to trade workshops. It additionally offers automotive workshop equipment, including vehicle hoists and scanning equipment, equipment servicing, and automotive accessories and maintenance products.  Peter Warren Automotive Holdings Limited (ASX: PWR) is an Australia-based company selling new and used cars, inventory, and trade-related services for spare parts. The company also provides various automotive goods and services, such as brand-new and used cars, auto maintenance, and auto repair: extended service contracts, vehicle protection products, and other aftermarket products. Kalkine’s Sector Report covers the Investment Summary, Sector Overview & Supporting Catalysts, Data Insights and analysis, Financial Metrics, Financial Commentary, Risks, Outlook, and Technical Analysis along with the Valuation, Target Price, and Recommendation on selected stocks.

Investment Summary

Sector Overview and Supporting Catalysts

Data Insights and Analysis

Index Performance

Key Drivers versus Key Constraints

Investment theme and stocks under discussion (BAP, PWR)

After understanding the sector, let us now look at two companies from the Retail Sector listed on the ASX. The price potential of the companies under discussion has been analysed based on the EV/Sales multiple valuation method.

1. ASX: BAP (Bapcor Limited)

(Recommendation: Speculative Buy, Potential Upside: Low Double-Digit, Mcap: AUD 1.87bn)

BAP supplies auto parts, accessories, equipment, services, and solutions with headquarter in Australia. There are four segments within the company. To service and repair passenger and commercial vehicles, the trade segment provides automotive aftermarket parts and consumables to trade workshops. It additionally offers automotive workshop equipment, including vehicle hoists and scanning equipment, equipment servicing, and automotive accessories and maintenance products.

The stock has witnessed a dip of ~19.91% in last 3 months, and over the last 6 months, it has decreased by ~12.89%. The stock has a 52-week low and 52-week high of AUD 5.110 and AUD 7.090, respectively, and is currently trading below the 52-week high-low average. BAP was last covered in a report dated ’11 October 2023’.

2. ASX: PWR (Peter Warren Automotive Holdings Limited)

(Recommendation: Speculative Buy, Potential Upside Low Double-Digit, Mcap: AUD 425.47mn)

PWR is an Australia-based company selling new and used cars, inventory, and trade-related services for spare parts. The company also provides various automotive goods and services, such as brand-new and used cars, auto maintenance, and auto repair: extended service contracts, vehicle protection products, and other aftermarket products.

The stock has witnessed a dip of ~2.45% in last 3 months, and over the last 6 months, it has decreased by ~7.72%. The stock has a 52-week low and 52-week high of AUD 2.130 and AUD 2.910, respectively, and is currently trading below the 52-week high-low average. PWR was last covered in a report dated ’15 September 2022’.

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 11 January 2024. 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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