Raising FVE for BRP as Efforts to Pivot Production Across Categories Show Promise

We plan to lift our CAD 122 fair value estimate for narrow-moat BRP by a high-single-digit rate after digesting second-quarter results and nudging our back half expectations a bit higher. Second-quarter sales and profits outpaced our expectations, with sales of $2.44 billion (up 28%) ahead of our $2.37 billion preprint estimate. This was mostly attributable to the year-round segment, which delivered 42% growth, helped by strong side-by-side and three-wheeled vehicle shipments. EPS of $2.94 were also better than our $2.78 forecast, helped by constrained selling and marketing spend, as the industry limits its activity given the lack of inventory to promote. Given the company's continued efforts to shift production to units with most relevant seasonality and best component availability, BRP was able to grab retail share in North America in its side-by-side, ATV and three-wheeled vehicle segments. We surmise these gains will neutralize as component access improves across the industry over the next six to nine months.