AutoWallis: Driving growth amid market challenges
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Commodities - Technical Analysis
Gold and silver have broken their downtrends, triggering upward waves that still hold potential for further gains. After a strong retest, the oil price may settle into a range, but there are still opportunities for further gains. Natural gas prices did not reach a new low, but no pattern indicating a reversal has yet emerged. Copper is maintaining its upward trend; it must rise again within the next few days, or the rally could break down. Wheat and corn are also beginning to turn upward again from key support levels after strong retests.
Strong performance from Expedia
Despite the war in the Middle East and rising energy prices, U.S. consumer spending—and, by extension, travel DEMAND—proved to be sufficiently resilient in the second quarter, from which Expedia also benefited greatly. The company beat analysts’ expectations across all major metrics, with revenue growing by 14%, while also successfully maintaining its strategic goal of cost control, resulting in profit growth of over 20%. Cash generation is very strong, which is being used to repurchase shares, and for now, there's no sign of a slowdown on the demand side, leading the company to raise their full-year expectations for this year. Given the improving fundamentals, we are raising our fair value estimate to $365.
We have revised our DCF model and earnings estimates following the latest quarterly report: we raise our 12-month target price to HUF 210 and maintain our Buy recommendation. If the company can successfully continue its acquisition strategy this year, our increased target price could prove conservative.
Currently, the short-term outlook for the European car market is not very supportive (although there has been some positive news recently), but we believe that the CEE markets where AutoWallis operates could grow faster, similar to last year.
In 2024, the company completed two acquisitions in the Czech Republic, the positive effects of which will be fully materialised from this year onwards. These acquisitions will not only increase sales, but also bring economies of scale. In addition, the focus will remain on expanding the higher-margin service business, which should continue to deliver above-industry earnings growth momentum.
Over the forecast period, we expect single-digit CAGR (7.5%) and EBITDA growth of ~10%. The updated model includes last year's two Czech acquisitions but excludes future planned acquisitions, so revenues could exceed HUF 570 billion and EBITDA could reach HUF 32 billion by 2029.
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