BRP’s Design Prowess Helps Drive Market Share Gains, Cementing Its Market Leadership Position

Fiscal 2024 should be another banner year for BRP’s DOO sales given resilient consumer demand and some backfill units still needed at its dealers. However, we don’t think this will distract the team from its long-term product and operational priorities, which should improve the firm’s competitive positioning. BRP’s strategic priorities focus on market share growth, lean operations, and cultivating an engaged workforce, all while homing in on evolving customer demands.

With manufacturing facilities located near demand (for example, personal watercraft in Mexico) and timely spend to increase facility capacity as needed, BRP should continue to capture efficiencies from its plants. Firmwide centers of expertise and excellence allow BRP to manufacture optimally, improving utilization and allowing it to bring products to market quickly, ensuring a continually relevant and in-demand product lineup (with electric vehicle offerings in all segments by 2026). Because BRP is exposed to many customer segments, we don’t believe acquisitions are required for expansion. However, we think entry into white-space categories (like motorcycles) and small acquisitions, particularly in parts and accessories or marine, are possible and could support margin improvement.

BRP has fiscal 2025 goals of CAD 12 billion-CAD 12.5 billion in sales and CAD 13.50-CAD 14.50 in EPS, levels we expect the firm to achieve. We forecast sales of CAD 11.9 billion and EPS of CAD 13.64 in fiscal 2025. Demand has persisted despite economic uncertainty, and innovation should continue to drive sales, particularly in the marine segment, where BRP has launched Project Ghost (altering placement of outboard engines) and the Sea Doo Switch (marine is expected to grow to CAD 1 billion by 2025, from CAD 490 billion in 2023, according to BRP, although we model around CAD 820 million with current products). In our base case, BRP’s brand intangible asset and leading market share position result in competitive returns on invested capital and a narrow economic moat. With further improvements to the manufacturing process and scale, BRP could also develop a cost advantage over time.