While some brokers were quick to identify car-related stocks as key beneficiaries of the government's budget night decision to halve the 44.2c-per-litre fuel excise for six-months, the jury’s out on whether it will have any material impact on their earnings.
Based on Macquarie’s numbers, halving of the fuel excise for six months will more or less benefit the household sector and commercial motorists in equal measure.
UBS surmises that the price of petrol back below $2-a-litre will have a direct link to the number of kilometres travelled by motorists, and hence directly benefit listed fuel companies Ampol (ASX: ALD) and Viva Energy (ASX: VEA).
While Ampol was trading around 2% lower at noon today, rival Viva was up around 1%.
What the upside for Ampol and Viva remains to be seen, what’s less clear is any inference that auto related stocks like Bapcor (ASX: BAP), GUD Holdings (ASX: GUD), AMA Group (ASX: AMA), Eagers Automotive (ASX: APE), and Autosports Group (ASX: ASG) will witness greater need for parts and services due to an increase in vehicle kilometres travelled.
UBS also expects other listed car dealership groups - which also include the likes of Turners Automotive (ASX: TRA), Motorcycle Holdings (ASX: MTO) and Peter Warren Automotive (ASX: PWR) – to benefit from demand for vehicle servicing and from continued strong appetite by buyers for new and used vehicles.
In light of major delays in getting cars to market, due to supply chain disruptions which are boosting profit margins, it’s unclear whether Australia’s largest car dealership group Eagers Automotive and Autosports Group, which specialises in higher-end car brands can capitalise on strong appetite by buyers any time soon.
Limited supply of new or used cars clearly undermines the instant asset write-off measures which some analysts suspect would – in a perfect world – ignite a pull-forward of demand, with tradies racing to buy new utes while they can.
However, one stock on the right side of the supply chain conundrum appears to be Super Retail (ASX: SUL), owner of the Supercheap Auto retail chain.
Analysts at MST Marquee believes Super Retail – which also owns popular chains like BCF and Rebel Sports – is a “strong buy idea” for investors.
Despite market concerns over its elevated inventory, MST Marquee believes Super Retail’s higher inventory levels across all of its retail brands will successfully offset supply chain disruptions issues that have plagued the broader market.
MST Marquee’s 12-month price target on Super Retail of $14.10 represents a 30% upside to the current price.
Super Retail was up around 2.3% at noon today.
But a potential medium-term negative for vehicle dealers looms from mid-2023 when a short-term pandemic measure previously introduced to stimulate purchases under the broader instant asset write-off scheme comes to an end.
The instant tax deduction scheme means that businesses will need to be using new equipment by June 30, 2023, to claim full expensing.
However, Ord Minnett reminds investors that potential beneficiaries of it still being around for another year and a bit are four-wheel drive parts group ARB Corporation, and Eagers Automotive.
Both stocks were up over 2% at noon today.
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