Canaccord Initiate Coverage Seeing it “tuned up for resilient growth,” Canaccord Genuity analyst Luke Hannan initiated coverage of Uni-Select Inc., a Quebec-based distributor of auto products, with a “buy” rating.
“In our view, the sharp top-line and EBITDA margin recovery realized by UNS in 2021 (9.6 per cent and 280 basis points year-over-year, respectively) as it navigated pandemic-related headwinds demonstrates an underrated degree of resilience within the company’s business model,” he said. “Despite sales remaining below prepandemic levels, UNS’ EBITDA margin has never been stronger, owing to several cost optimization initiatives completed in recent years.
“We see ample potential for further margin expansion across UNS’ operations (and particularly within the company’s US segment) as the overall number of miles driven and, consequently, vehicle service volumes approach pre-pandemic levels. Augmenting this organic growth profile is a solid balance sheet (2.0 times as of Q1/22) supportive of accretive small and/or large-scale M&A, allowing the company to defend its leading share position across its footprint and serving as a potential catalyst for the stock.”
Mr. Hannan set a target of $35 per share. The current average is $36.08.
“Management’s view is that revenue and adjusted earnings for 2022 will be ‘modestly higher,’ consistent with consensus forecasts, positioning the company well to meet and potentially exceed its targets, in our view,” he said. “Despite UNS shares outperforming, up 18 per cent year-to-date (vs. the S&P/TSX Consumer Discretionary index falling 16 per cent YTD), the stock trades at 9.8 times our 2022 EBITDA estimate vs. peers, which trade at 10.7 times. At current levels, we believe UNS shares are attractively valued.”