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.