Super Retail Group Limited

Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

Super Retail Group Limited (ASX: SUL) is engaged in the retail business, and it owns brands such as Supercheap Auto, rebel, BCF and Macpac. The company owns and operates 716 stores across Australia and New Zealand.

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

1.3 Top 10 Shareholders: The top 10 shareholders together form ~46.75% of the total shareholding. Rowe (Reginald Allen) and Challenger Managed Investments Ltd. are holding a maximum stake in the company at ~29.18% and ~5.40%, respectively.

1.4 Key Metrics: The company has reported a high EBITDA margin of around 19.8% in FY22 compared to the industry median of 15.1%. Further, the asset-to-equity ratio improved in FY22, which was around 2.26x compared to 2.43x in FY21. Below is captured the trend of the debt-to-equity ratio and current ratio:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Results Highlights of FY22: During FY22, the company reported a high inventory position across all its brands which reflects its strategic decision to temporarily build stock positions to address the growing demand and mitigate the impact of supply chain risk. The company reported lower cash flow in FY22 due to increased inventory investment and investment in capital expenditure which include AUD 58.8mn in store capes and AUD 65.9mn as other capex.

2.3 Business Strategy: The primary value drivers behind the company's strategies are the growth in annual customer value, followed by creating an efficient omni-retail supply chain network and ensuring organic growth.

2.4 Dividend History: The company declared the fully franked final dividend of AUD 43.0 cents per ordinary share in FY22, bringing the full year dividends to AUD 70.0 cents per share. The company reflects a payout ratio of 65% of the full year underlying NPAT.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales 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 not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is October 13, 2022. 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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