The biggest domestic distributor of spare parts for cars made investors used to systematic improvement of results. Keeping a positive trend in 2015 and good perspectives for the following years can be seen in company’s share price, which is much more favourable than the market. Within a year, the market value of the company went up by 9 percent, whilst WIG index lost 15 percent.
Record-breaking year
The board of directors bets on organic growth, opening branches in the country and abroad. The plan is to reach PLN 10bn in 2020. In 2015 the Group, assuming a two-digit growth in revenues, made another step to reach that goal. Its revenue went up by 21.5 per cent, to a record-breaking PLN 4.74bn. The result is mainly thanks to increasing sales in foreign daughters which are operating on several markets of the region. Their sales revenue went up by 38% in comparison to previous year, whereas domestic sales went up by 16.5%. Sale on Polish market is still around 60 percent of total revenue of the Group, but this share is constantly decreasing.
Analysts estimate that the results for 2015 will also present a two-digit improvement in profit, although it shall be smaller than in previous years. The annual net result is to grow by 12.6 percent, to a record-breaking PLN 199.8m.
The analysts notice a potential
According to analysts, Inter Cars has a chance to continue the positive trend in results. – From operational point of view the company will have a year of intense work, in result of which the company shall move to the new warehouse. This, in turn, shall influence its dynamic development – said Sylwia Jaśkiewicz, analyst of BOŚ BH. – Inter Cars seems to be resistant to macroeconomic environment. Demand for spare parts is still growing, and additionally the company develops its product range with new categories of products, combining it with geographical expansion - added the expert.
Analysts agree that the driving force of increase of Inter Cars shall be foreign markets. – We assume a further dynamic growth of revenues in 2016 mainly by increasing market share in Central and Eastern Europe – said Jakub Rafał, analyst of Noble Securities. Whilst operational margins shall be kept on the same level to the year 2015. On one hand they shall be favoured by increase in sale of spare parts for passenger cars, mostly on new markets, but on the other hand they may be inhibited by growing sale of low-margin tyres and selling baskets in new markets.
At the same time the expert puts emphasis on a too small logistic centre for the needs of the company. – A delay in launching the new logistic centre with such a dynamic growth is not good information. Because of limited capacity of warehouses, the company is using at the moment, it has to add new, temporary ones, what influences the business in a negative way, causing increase in cost of distribution and decrease in profit margins. It was visible back in 2015r and shall still be seen in 2016, and the decrease in cost, according to forecast shall take place no sooner than in 2017. – said Jakub Rafał.
SWOT analysis
Advantages:
- Leading position on Polish market and in Central and Eastern Europe.
- Diversification of markets.
- Wide and available product range.
- Development of garage chain
- Participation in ATR purchase group (access to cheaper purchases).
Disadvantages:
- The influence of economic situation on demand for automotive spare parts, and at the same on financial results of the Company.
- Seasonality of sales.
- The risk of exchange losses.
Opportunities:
- Increase of number of registered cars
- Improvement of economic situation
- Big growth potential of foreign markets
- Launching new distribution centre in Zakroczym
Threats:
- Unfavourable exchange rate changes.
- Risk associated with entering major foreign competitors on the market
- Possible law changes which will limit import of used cars.
Questions to... Piotr Zamora
CFO Inter Cars
In recent years the business of Inter Cars has been growing with two-digit numbers. What are the expectations for 2016?
We assume that is will be another year of dynamic growth. The growth rate of around 15% is real.
Why such optimistic assumptions?
Regarding domestic market, we want to develop faster that the market in case of spare parts for passenger cars. Such assumptions result from good economic situation on the market, which influence increase of demand for spare parts in our leading position on the market. We assume that in this favourable market environment we will be able to take advantage of our position in full, i.e. our wide product range and availability and constantly improving logistics. We are even more optimistic regarding spare parts for heavy goods vehicles. We are expecting that this year it will be one of the fastest growing segments. It will be mostly the result of just implemented strategy of developing this segment using distribution chain for passenger cars. Moreover in 2016 we are planning to open up around 30 new branches in the country, especially in regions where we were not present in full extent, whilst setting up new branches will have lower costs thanks to simplified procedures and sharing costs between branches.
How do you assess the potential of foreign subsidiaries?
Foreign branches still have the potential to develop faster than our domestic market. We assume that average growth outside Poland will be around 35%, as a result of further dynamic development of branch chain, development of new product segments, chiefly tyres and spare parts for trucks, and activities aimed at increasing profitability of foreign branches.
Are you looking for new markets?
Mainly we are focussing on the markets where we are present. One of the most interesting places is Italy, where in 2015 we launched the first branch. In the future this market can be really promising, mainly because it is three times bigger than Polish market. The key factor of the success is if our business model will work in a different Italian market.
What are your expectations regarding the profitability of the Group?
We expect that the percent margin in 2016 shall be kept at the same level in 2015. It is worth to notice that keeping the margins on the same level favours our strategy of increasing market share in the country and abroad because of high fragmentation of the market which is dominated by small companies competing only with prices.
In which categories of products can you see the biggest potential?
This year we are expecting growth higher than the market in all main categories of products, whereas the strongest emphasis is put on heavy goods vehicles segment. Regarding tyres and batteries we are planning promoting sale of those products with the service, i.e. redirecting customers to repair garages. In case of other product lines we are expecting growth rate on products that are technologically advanced, such as fuel feed systems, automatic transmissions, turbochargers and generally engine parts.
The key investment, new logistics centre, is delayed. When shall it be launched?
According to new, revised schedule the launch of the centre shall be in the middle of November 2016 and shall last till the end of February 2017, as there were some unexpected technical difficulties in the construction stage of the investment in Zakroczym. The general contractor made the necessary changes and on 11th January 2016 the whole area of the building was passed for equipment assembly.
How are you planning to solve the problem of lack of warehouse area before the new warehouse is launched?
In line with the new investment we are also running improvement works for increasing efficiency of logistics centre in Sosnowiec and Komorniki. Additional storage area of warehouse in Sosnowiec will be open in the last week of January 2016. In total the storage area of the premises shall be 40k sqm. At the beginning of January 2016 we also increase the logistics centre’s storage space in Great Poland to 18 thousand sqm.
Source:Parkiet
2016-01-29