BRP: Refocusing on Core Business by Attempting to Prune Languishing Marine Brands

Wide-moat BRP announced it would be placing its marine business up for sale, given the cyclical pressure the segment has recently encountered. Marine sales are projected to tumble by more than 50% since fiscal 2022, to just CAD 245 million in fiscal 2025, representing a mere 3% of firm’s total revenue base. Moreover, with a second year of negative gross margin performance anticipated at the segment in fiscal 2025, marine has acted as an unnecessary drag on earnings power, causing an EPS headwind of CAD 1.50. Given the lagging performance of the boat market over the last year, we don’t think this is the most opportune time to find a buyer. However, we surmise selling now may be a better choice than waiting for a return to positive margin performance in a market that could be very slow to recover. We wouldn’t expect this sale to fetch more than 1 times sales and as such the cash from the sale would not alter our CAD 101 ($75) fair value estimates.