We Expect Eagers Automotive to Capture Share from Smaller, Cost-Disadvantaged Competitors

We forecast that Eagers will continue to capture market share in the highly fragmented auto retailing segment. Following the merger with major player and former rival Automotive Holdings, Eagers now boasts an estimated market share of 11%. As the largest dealer in the market, Eagers can centralise back-office operations and fractionalise these fixed costs over a significantly larger volume and revenue base, affording a sustainable cost advantage over smaller peers. Accordingly, we estimate the company earns gross and net profit margins ahead of smaller competitors. We believe Eagers' extensive size and scale should allow it to deliver midcycle operating margins of around 3%.