BRP Inc T.DOO

Alternate Symbol(s): DOOO

Consumer Cyclical Leisure

BRP Inc. is a Canada-based company that specializes in powersports products, propulsion systems and boats. Its segments include Powersports and Marine. Powersports segment comprises Year-Round Products (all-terrain vehicles, side-by-side vehicles and three-wheeled vehicles), Seasonal Products (snowmobiles, personal watercraft and pontoons) and Powersports PA&A and OEM Engines (parts, accessories and apparel (PA&A), engines for karts and recreational aircraft, Pinion gearboxes and other services). Marine segment consists of boats, pontoons, jet boat and outboard engines and related PA&A and other services. Its brands include Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and pontoons, Can-Am on and off-road vehicles, Alumacraft and Quintrex boats, Manitou pontoons and Rotax marine propulsion systems and Rotax engines for karts and recreational aircraft. It is developing electric models for its existing product lines and exploring new low voltage and human assisted product categories.

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BRP Inc

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Post by retiredcfon Dec 02, 2021 8:56am

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Post# 34189161

TD 2

BRP Inc.

(DOO-T, DOOO-N) C$101.30 | US$79.11

Q3/F22 Results: Increasingly Constructive On Outlook Event

This morning, BRP reported Q3/F22 results that exceeded our forecast and consensus. F2022 Normalized EBITDA/EPS guidance at the mid-point was raised.

Impact: POSITIVE

Q3/F22 Summary: The Q3/F22 release was positive on all fronts. The financial results were ahead of expectations, consumer demand remains buoyant, and guidance implies attractive EPS growth in Q4/F22 and F2023. Management continues to invest in product innovation and capacity expansion that is being rewarded through market share gains. Despite heightened near-term investment, the balance sheet remains financially sound with leverage below management's target range. This should support an active NCIB that was renewed this morning.
Guidance / Outlook: Our channel checks and management's disclosure of record pre-order intake, continues to signal strength in consumer demand. While industry headwinds such as supply chain disruptions persist, BRP is actively pre-building inventory that should be drawn down in forthcoming quarters as components become available and provide a modest-to-notable near-term revenue tailwind. We are increasingly constructive on the financial outlook for Q4/F22 (potential to beat) and above consensus growth outlook for F2023.

Financial Position: BRP is in a solid financial position despite a material investment in working capital in F2022. We anticipate this to unwind in Q4/F22 and through 1H/F23, placing the company's leverage well below its target range. Despite further capacity expansion plans announced today for its SSV platform, we maintain our view for an ongoing return of capital over our forecast horizon.

Investment Outlook: We were admittedly cautious coming into this much anticipated "soft" y/y quarter. That stated, the positive developments within this morning's release provide additional conviction in our near- to mid-term growth outlook. This is supported by the strong across-the-board level of pre-order intake, demand for new product introductions exceeding expectations, the meaningful pre-build inventory balance, and commitment to further increase production capacity as new capacity ramps. We believe the positive EPS/FCF growth outlook and attractive valuation combine to make the current share price compelling.

TD Investment Conclusion

Our BUY rating and $140.00 target price are unchanged.