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On Wednesday, Deutsche Bank (ETR:DBKGn)’s analyst David Brockton adjusted the price target for Inchcape (OTC:INCPY) Plc (INCH:LN), an automotive distributor and retailer, to GBP10.00 from the previous GBP11.00. Despite this reduction, the firm maintained its Buy rating on the company’s shares. Brockton’s analysis noted that Inchcape’s fiscal year 2024 profits aligned with consensus expectations, citing a modest increase in organic revenue and a slight dip in operating margins.
Inchcape reported a 2% rise in organic revenue, although the fourth quarter showed no growth compared to the same period in the previous year. The company’s operating margins contracted by 30 basis points, settling at 6.3%. This was attributed to lapping effects from exceptional items and excess volumes in the prior year.
Brockton highlighted several challenges and expectations for Inchcape in fiscal year 2025, amidst a backdrop of heightened macroeconomic uncertainty and intensified competition among automotive original equipment manufacturers (OEMs). The analyst anticipates the company’s performance to hover towards the lower spectrum of management’s newly established medium-term targets. These targets include an organic volume compound annual growth rate (CAGR) of 3-5%, operating margins around 6.6%, and a free cash flow to profit after tax (FCF:PAT) conversion rate of 100%.
The report also provided a regional outlook for Inchcape, suggesting that the Europe & Africa segment is likely to experience a continued normalization of volumes following a period of excess. The Asia-Pacific (APAC) region is expected to encounter varied dynamics, with increased competition in markets such as Singapore and Hong Kong. However, improvements are anticipated throughout the year, driven by new contracts and model introductions. In contrast, the Americas are seen as better positioned to sustain a recovery trajectory.
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