Auto parts and pumps company GUD is up +48% year-to-date, helped by a strong FY23 result delivered in August; NPAT was a ~4% beat to consensus at $118.7m, with the significant contribution coming from APG, a business they acquired in FY22. Supply chain issues that have troubled GUD are also starting to clear, further supporting margins and cash conversion. The company recently sold their pump business, which has taken some pressure off the balance sheet and simplified the structure moving forward – we feel the stocks trading around fair value trading on an Est PE 13.5x for FY24 while being forecast to yield 3.5% over the next 12- months.
- We can see GUD testing resistance at $13 into 2024, or 15% higher, but we would consider fading such a move on risk/reward grounds.
MM is bullish towards GUD short-term
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