BRP Inc T.DOO

Alternate Symbol(s): DOOO

Consumer Cyclical Leisure

BRP Inc. is engaged in the design, development, manufacturing, distribution and marketing of powersports vehicles and marine products. The Company’s segments include Powersports and Marine. The Company’s Powersports segment comprises Year-Round Products, which consists of all-terrain vehicles, side-by-side vehicles and three-wheeled vehicles; Seasonal Products, which consists of snowmobiles, personal watercraft and pontoons, and Powersports PA&A and OEM Engines which consists of parts, accessories and apparel (PA&A), engines for karts and recreational aircraft and other services. The Company’s Marine segment consists of boats, pontoons, jet boats and outboard engines and related PA&A and other services. Its portfolio of products includes 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, as well as Rotax engines for karts and recreational aircrafts.

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BRP Inc

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Post by retiredcfon Jun 16, 2022 8:44am

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Post# 34760687

RBC

June 15, 2022

BRP Inc.
Key takeaways from analyst day

Outperform

TSX: DOO; CAD 82.93; NASDAQ: DOOO

Price Target CAD 111.00

Our view: We attended BRP’s analyst day in Orlando, FL and came away impressed with the company’s ambition, strategy, products which when coupled with their execution makes BRP our favorite play in powersports. Near-term the macro may continue to weigh on sentiment, but with the current multiple already near the lows, we see a positive mid-term risk/ reward.

Key points:

• FY25 revenue target now C$12-C$12.5bn, ~12% FY23-25 CAGR and solidly above RBC/consensus of C$10.8bn/C$10.9bn so we see opportunity for positive revisions as the market gets more comfortable with the outlook.

Can-Am revenue target of C$7bn from C$5bn prior. Within Can-Am, for SSV BRP is looking for 30% market share (from ~22% current) which would bring in another C$1bn+ in revenue. This considers 4-6% SSV industry growth. While investors may take their own view of industry growth, we think this means BRP believes they can outgrow the industry by ~10pp. We estimate BRP SSV "machine" revenue recently surpassed ~C$2bn in FY22. So adding C$1bn would be a ~15% CAGR. If industry is ~5%, this suggests ~10pp of the annual growth is BRP specific. BRP's SSV plan centers around having more runway in non-premium segments and focusing on large geographic markets and replicating the playbook and success they’ve had in Texas (increased share 5x ~5 years and took from below average share to above average share).
Marine is increasingly important for BRP growth. The company reiterated a C$1bn FY25 goal despite the wind down of Evinrude. Here, BRP plans to leverage their Rotax branded Project Ghost engine (which offers the best attributes of in-boat and outboard engines to provide more space on boats, etc) and launch new Manitou, Alumacraft and Quintrex boats. We got a chance to ride on the upcoming Manitou and believe BRP is offering a very feature compelling, price competitive product. BRP believes Manitou share can go from LSD% to 10%. New Manitou interest is higher than Sea-Doo Switch which was very successful for BRP. Importantly, the new boats are off a modular platform so expect rapid iteration scaling to many segments, similar to what BRP did in SSV.
Investors are increasingly concerned about the macro/consumer but BRP not really seeing many signs yet. While there could be near-term impact, management is very positive on mid-to-long term customer growth and expects demand to remain above pre-COVID levels for the next decade. BRP also sees the total powersports restock as a C$1.4bn opportunity.
Electrification is a big part of BRP's future not just for transition of their current portfolio but also to enter new markets starting with the electric 2-wheeler in 2024. As part of their CSR program, BRP wants 50% of 2035 units to be electric. In our view, this has to include new expansions. (continued on p.2)