This report is an updated version of the report published on 22 October 2024 at 03:05 PM AEDT.

Eagers Automotive Limited (ASX: APE)

Eagers Automotive Limited is engaged in the sales of new and used motor vehicles, the distribution and sale of parts, accessories and car care products, the repair and servicing of vehicles, the provision of extended warranties and the ownership of property and investments.

Recommendation Rationale - SELL at AUD 11.980

• Decline in Net Profit: APE registered an 18.0% YoY decline in net profit in the first half of FY24 ended 30 June 2024. Net profit attributable to members also dropped by 15.8% YoY.
• Decline in Cash: Cash and cash equivalents stood at AUD 297.5mn at the end of June 2024, down from AUD 352.9mn at the end of June 2023.
• Technical Standpoint: With a 14-day RSI of ~66.62, APE’s stock is in the overbought territory. Thus, the stock price might be overbought and could be due for a price correction or consolidation.
• Risks: APE is exposed to risks associated with fluctuations in vehicle demand and supply chain disruptions, which can impact its sales and profitability. Additionally, changes in government regulations and economic conditions may influence consumer purchasing behaviour and operational costs.

APE Daily Chart

(Source: REFINITIV; Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY December'25E) (Illustrative)

APE is expected to trade at a premium due to disciplined cost management, expected acquisitions, anticipated organic growth in FY24, and other factors. For conducting the valuation, the following peers have been considered: Amotiv Ltd (ASX: AOV), Bapcor Ltd (ASX: BAP), and Super Retail Group Ltd (ASX: SUL).

Considering that the stock has crossed its R1 level and approaching R2, market uncertainties, and risks associated, the share price can witness some correction at the current levels before moving higher. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 11.980, as of 22 October 2024, at 10:05 AM AEDT.         

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. 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 22 October 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 downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.