The foundations speak for Inter Cars

 

The biggest Polish distributor of automotive spare parts has been pleasing its investors with substantial growth of revenues. Thai is why lower than expected sales results for the 4th quarter were like a bucket of cold water.  Inter Cars recorded net profit of PLN 35.5m, a decrease of 2 percent in comparison to the same period a year ago.  Gross margin on sales went down to 28.5 per cent, a decrease from 31.3 percent a year ago.  Meanwhile, the forecasts of brokerage houses assumed a net profit of PLN 44m.  Investors panicked just after the results had been published, and the share price went down by almost 5 percent.  According to analysts there are no reasons to worry. 

 

- Sales revenues of the company are growing fast, and Inter Cars has proven that on the longer run the revenues are followed by net profits. That is why a slight decrease in profits at strong increase of sales seems not to worry investors at the moment.  Such signals – periods of fall in profit at growing sales revenues – we have already seen some in the past, and it has always turned out that the profits were quickly getting back to growing levels – says Adam Lukojć, manager from Skarbiec TFI.

 

Good perspectives

In the whole year 2014 Inter Cars made a net profit of PLN 177.4m in comparison to PLN 147.8m in 2013.  The sales revenues growth in an annual basis is still high and according to analysts will remain on this level for the few coming years. 

 

- We consider that decrease in profitability is mainly due to decrease of margin in passenger cars market, and this in turn was due to increased activity of competitors on the market.  Although we are forecasting a further decrease in profitability this year by another 1 percent, we are also counting on the effect of financial leverage  and savings in financial costs. That is why we are expecting similar net profitability – says Grzegorz Kujawski, analyst from Trigon BH.

 

In his opinion, the support for the company shall be recovery of the economy, which will positively influence the sales of cars.  Additinally the company should take advantage of lower fuel prices, which increase the utilization of cars. 

 

- This year we are expecting a 7-percent increase in domestic sales and over 25 percent increase abroad. Additionally, launching a new logistics centre in 2016 in Zakroczym shall be an impulse for further growth. Increased storage area and further development of product range and more effective customer service - adds Grzegorz Kujawski. 

 

Hot share price 

Despite such a promising perspective, the share price does not want to grow.  Since the beginning of the year, the share price of Inter Cars went up only by 1 per cent, whilst among small and medium companies we can see a bull market.  According to some brokers, the shares are just expensive. 

 

- In my opinion, it is safer to decrease the share in the company. Historically the profit improvement growth reached even 30 percent.  High base and high price [ the price to profit indicator is 18 - red] make the growth potential quite limited.  Attitude of investors to stock market bears is much improved, that is why I think that in today's market environment there are many more interesting and better priced companies – says Wojciech Juroszek, broker from AgioFunds TFI.

 

Grzegorz Kujawski, analyst from Trigon BH, in his last recommendation suggested keeping the shares of Inter Cars and he does not change his mind. But he thinks that the company is not priced so high. 

 

In comparison to similar stock exchange companies quoted abroad, Inter Cars is listed with a 15-percent discount.  I think it is justified if we take into account high growth of this year's results.  The market consensus in case of foreign companies assume a growth of net profit by 8% YtY, whilst for Inter Cars we are assuming 14% growth - says Grzegorz Kujawski. 

 

Source: Puls Biznesu

2015-03-10