BRP Inc T.DOO

TD

[retiredcf]

BRP Inc.

(DOO-T, DOOO-N) C$108.41 | US$79.25

Q2/F24 Preview: Focus to be Upon Retail Demand Outlook

Event

BRP is scheduled to report its Q2/F24 financial results on September 7.

Impact: NEUTRAL

• Q2/F24 Outlook: We anticipate BRP to deliver solid Q2/F24 financial results, illustrating attractive sequential EPS growth and a flattish y/y performance. This should be a function of strength within its SxS and PWC product lines, that were negatively impacted in Q2/F23 by supply chain constraints. Despite our view that BRP should meet/exceed near-term consensus estimates, our focal point will be upon the consumer demand outlook, and sustainability of its financial targets. While we acknowledge BRP's innovation is driving attractive market share gains and that it caters to a resilient consumer profile, our neutral recommendation reflects a cautious view of the risks of a heightened interest rate environment that is showing signs of slowing general discretionary purchases. Our EPS forecast of $3.00 is in line with consensus of $2.98.

• Consumer Demand Outlook: Recall in Q1/F24 management highlighted some potential indications that could present potential headwinds to BRP's growth outlook. This included growing sales incentives, softening used-vehicle pricing, slowing PAC wholesales, and higher rates upon dealer floor plans/consumer perspective. Several of our channel checks indicate that these trends are continuing and that the Marine segment remains challenged. At a minimum, this should lead to lower dealer replenishment requirements as inventory levels approach “optimal levels”.

   NCIB/FCF: Solid near-term financial results and the reversal of w/c should generate strong F2024 FCF. This should support an active NCIB, as illustrated by BRP purchasing ~1.51mm shares in Q2/F24.

   Investment Summary: Our HOLD recommendation reflects our cautious macroeconomic outlook that we believe is likely to warrant a valuation toward the low end of its historical average. While we are positive on the long-term secular outlook, innovative product line-up, and strong management team, it is our view at this point of the economic cycle that there are currently more attractive alternatives within our coverage universe.

  TD Investment Conclusion

  We maintain our HOLD recommendation and $110.00 target price.