Despite Supply Chain Constraints, BRP Set to Deliver Healthy Growth as Demand Remains Robust

We plan to raise our CAD 115 ($92) fair value estimate for narrow-moat BRP by a low-single-digit rate after assessing first-quarter results and accounting for time value. We view shares as undervalued, trading at a 25% discount to our updated intrinsic value and believe the investment case for BRP is compelling. Even with persistent supply chain constraints (limiting retail product), BRP was able to deliver flat sales (at CAD 1.8 billion), although this was largely attributable to parts, accessories, and apparel sales, which rose 14%. Hard goods sales were more difficult to capture given ongoing delays in components, resulting in year-round product sales that climbed just 1%, while seasonal sales contracted 12% (which we expect to reverse in the second quarter as more components are allocated to the segment). EBITDA was 15% of sales, versus 21% last year, with gross profit declines packing the biggest punch due to inflation.