Short-term discount, long-term mark-up

研报英文原文证据摘录

Short-term discount, long-term mark-up

Macquarie Equity Research Briscoe Group

Investment thesis

The Neutral case rests on a clear tension:

1. Near-term earnings risk has increased.

Trading momentum has softened, consumer confidence remains weak, value-focused

behaviour is likely to persist and retailers continue to rely on promotional activity to

drive conversion.

2. Medium-term gross margin upside remains credible.

BGP has reduced inventory, maintained strong cost discipline, retained a material

online mix and is approaching the point where the Drury distribution centre should

begin delivering efficiency benefits.

3. Evidence is not yet sufficient to underwrite an upgrade.

We need to see GP margin expansion, lower promotional intensity and signs that DC

efficiencies are being captured before moving to a more constructive stance.

In short, the earnings recovery has been delayed, not cancelled. But until the margin recovery

becomes visible in reported numbers, we believe a Neutral recommendation remains

appropriate.

Our revised NZ$4.85 price target is based on a discount to our DCF valuation and is reduced

from NZ$5.05, reflecting lower near-term earnings forecasts. The valuation assumes a 10.0%

WACC, 0.9 beta, 7.0% ERP, 4.5% risk-free rate and 2.0% terminal growth rate.

At the current price of NZ$4.60, our target implies a 12-month TSR of approximately 10%,

including dividends. This supports a Neutral recommendation.

We see upside to valuation if BGP demonstrates a sustained recovery in GP margin,

particularly if FY28-FY30 margin expansion flows through to EBIT more strongly than

currently forecast. Conversely, further earnings downgrades or evidence that FY26 margin

pressure is structural would limit valuation upside.

Catalysts

Positive catalysts