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Lifting BRP Fair Value Estimate to CAD 84/$67 as Demand Indicates Support for Brand Set to Persist

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We are raising our fair value estimate for narrow-moat BRP to CAD 84/$67 from CAD 59/$46 after adjusting our outlook for the business. An initial CAD 9 lift arose from better fiscal 2021 fourth-quarter profitability and the time value of money. While total sales grew 12% to $1.8 billion, profitability came in well ahead of our expectations. The fourth-quarter adjusted gross margin of 27.7% expanded 400 basis points year over year, helped by better pricing, lower promotions, and mix, despite logistic cost headwinds. This led to a fourth-quarter normalized operating margin of 14%, the highest fourth-quarter level seen since fiscal 2015. Along with better sales, leveraged costs allowed normalized EPS to reach CAD 1.82, marking 63% growth.

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Company Profile

Business Description

BRP designs, develops, manufactures, distributes, and markets snowmobiles, all-terrain vehicles, and personal watercraft under the Ski-Doo, Sea-Doo, Can-Am, and Lynx brand names. It also builds engines under the Rotax brand (after discontinuing the Evinrude outboard engine business in 2020) and offers parts, accessories, and clothing that cater to its core consumers. In 2018, the company created a new marine group, acquiring boat manufacturers Alumacraft, Triton (which makes Manitou pontoon boats) and Telwater (in Australia). At the end of fiscal 2021, the company marketed its products through a network of more than 3,500 independent dealers and 190 distributors in about 130 countries.

726 Saint-Joseph Street
Valcourt, QC, J0E 2L0, Canada
T +1 450 532-6154
Sector Consumer Cyclical
Industry Recreational Vehicles
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 31, 2022
Stock Type
Employees 14,500