Citi starts coverage of Inchcape at ‘buy’

Citi initiated coverage on car dealership Inchcape on Thursday with a ‘buy’ rating as it said the company’s opportunity to consolidate automotive distribution in less than 1 million sales end markets is unique.

"We expect this to happen both by winning new distribution agreements and M&A on attractive (typically 6x-9x) multiples," it said.

"We believe that the need for auto OEMs (customers) to endorse transactions makes these multiples sustainable."

Citi said it expects expect Inchcape’s Australia business to outperform consensus expectations in 2023 on higher volumes, and believes that the market may underestimate the operating leverage opportunity.

The bank noted that its estimate for 2023 adjusted pre-tax profit of £513m is around 5% above company-compiled consensus of £485m.