OTCPK:UNIEF - Post by User
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retiredcfon May 03, 2022 8:18am
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Post# 34650373
TD
TDCurrently have a $31.00 target. GLTA
Uni Select Inc.
(UNS-T) C$28.93
Q1/22 Preview: Expect Pricing to Drive Strong Organic Growth - Corrected Version
Event
UNS reports Q1/22 results pre-market on May 5. Conference call: 8:00 a.m. ET (1-888-390-0549).
Impact: NEUTRAL
We forecast Q1/22 consolidated revenue increasing 7.5% y/y to $397.7mm (cons: $399.2mm) and adjusted EBITDA of $37.1mm (cons: $34.7mm). Although Omicron and supply chain challenges present significant uncertainties in Q1/22, we are encouraged by the recovery in driving trends and collision rates. Additionally, UNS' DIFM auto parts distribution peers (LKQ and GPC) and the refinish paint OEMs (PPG and Axalta) all posted healthy organic growth in the regions where they overlap with UNS.
FinishMaster: We model Q1/22 SSSG of +9.0% y/y (revenues still down ~16% from Q1/19). We expect paint sales will lag the recovery in U.S. collision claims, which increased 18% y/y (still ~6% below 2019 levels), reflecting the inability of collision repair facilities to keep up with demand (technician shortages and parts availability issues); collision repair backlogs reached record levels of 4.5 weeks in Q1/22 and Enterprise reported another unprecedent increase in its average length of car rental to 18.2 days (a proxy for collision repair cycle times). Paint raw material inflation continued at unprecedented levels during Q1/22 (up >25%), which we anticipate will drive strong price passthrough and margin growth for UNS this quarter. Major paint OEMs Axalta and PPG both reported positive U.S. refinish volume and price growth y/y.
Auto parts: We anticipate strong results from both CAG and GFS, with major competitors GPC and LKQ both reporting solid Q1/22 price growth and demand given continued economic reopening, recovering travel trends and inflation pass through (see Exhibit 3). The supply chain remained problematic but manageable. In our view, the combination of lack of new car inventory and elevated used car prices should be constructive for aftermarket parts demand across 2022/2023.
TD Investment Conclusion
Although the operating environment remains challenging, given supply-chain and labour headwinds, UNS' new team is delivering strong results in its turnaround strategy. In our view, the business is back on solid footing and ready to execute on growth, with possible M&A upside. We acknowledge that our return to target is skinny for a BUY recommendation and will revisit alongside Q1/22 results.