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Wesfarmers Ltd WES

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API’s Upgrade to Fiscal 2021 Earnings Unlikely To Change Current Offers; FVE Unchanged

Shane Ponraj, CFA Equity Analyst

Analyst Note

| Shane Ponraj, CFA |

We maintain our AUD 1.55 fair value estimate for no-moat Australian Pharmaceutical Industries, or API, after the company lifted fiscal 2021 underlying EBIT guidance by 4% to about AUD 70 million. API’s earlier guidance range of AUD 66 million to AUD 68 million assumed Sydney lockdown restrictions would remain in place until July 31, 2021. Despite the lockdown persisting longer as we expected, trading performances at suburban and regional Priceline pharmacies and online were stronger than the company projected. API also experienced elevated volumes through its pharmacy distribution business that it did not anticipate. Accordingly, we increase our fiscal 2021 underlying EBIT forecast by 10% to AUD 70 million but leave our long-term estimates broadly unchanged.

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Company Profile

Business Description

Wesfarmers is Australia's largest conglomerate. Its retail operations include the Bunnings hardware chain (number one in market share), discount department stores Kmart and Target (number one and three) and Officeworks in office supplies (number one). These activities account for the vast majority of group earnings before taxes, or EBT. Other operations include chemicals, fertilisers, industrial and medical gases, LPG production and distribution, and industrial and safety supplies. Management is focused on generating cash and creating shareholder wealth in the long term.

123 St Georges Terrace, Level 14, Brookfield Place Tower 2
Perth, WA, 6000, Australia
T +61 893274211
Sector Consumer Cyclical
Industry Home Improvement Retail
Most Recent Earnings
Fiscal Year End Jun 30, 2022
Stock Type
Employees 217,000