Shares in Super Retail Group Ltd (ASX: SUL) have now fallen circa -16% since announcing a strong first half FY22 result which nevertheless disappointed the market, where consensus estimates had put the net profit result about 2% higher.
But this share price collapse has created an opportunity according to analysts at Morgans, who upgraded their recommendation to Buy, citing strong sales growth, better inventory management and product sourcing.
Other brokers covering the stock similarly suggested it is being oversold, with UBS and Credit Suisse mentioning the cheap valuation as reasons to retain their existing Buy ratings.
At Thursday’s closing price of $10.81, Super Retail is currently trading at 8x FY21 earnings.
The group reported first half FY22 sales of $1.7bn, down -4% compared to the prior period, and statutory net profit after tax (NPAT) of $110.8m, down -36% on first half FY21.
Group gross margin, at 46.7%, was about -1% lower than first half FY21, reflecting higher freight and logistics costs, bigger inventory and the increase in home delivery sales to 10% of total sales.
Group CEO Anthony Heraghty said the strong sales seen in first half FY22 have continued into the initial stage of the second half.
“Looking forward, the group will continue to reinvest in the business, including digital, loyalty and network to execute our strategic priorities and grow our four core brands,” he said.
Capital expenditure in FY22 is expected to total $125m, up from $97m in FY21.
Capex in first half FY22 was $63.3m - $33.9m higher than the prior period, comprising logistics and IT spending of $31.4m, and $31.9m on new stores and refurbishments.
Super Retail plans to open 16 new stores and refurbish a further 40 existing throughout FY22.
The company seems to be handling the transition to online well, reporting that digital sales jumped 64%, to a record $389m.
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