Eagers' Earnings Resilient While Consumers Are, but We Expect Demand to Wane as Supply Returns

We maintain our AUD 11.00 fair value estimate for shares in narrow-moat Eagers Automotive following solid operating and financial performance in 2022. Underlying NPAT of AUD 262 million was 9% down on 2021 and just 1% below our forecast. The lower result was principally due to higher interest expense and AASB16 impacts, with underlying operating earnings roughly flat on 2021. EBIT margins in the core car retailing segment (now the vast majority of earnings) remained at historically high levels of 5.6% (versus 5.5% in the prior corresponding period). The 10-year average is some 200 basis points lower at 3.6%.