One company that has turned in a good result this reporting season is Bapcor (ASX:BAP). Bapcor shares rose 5.9% on the day their financial year 2023 results were released.
Bapcor is a wholesaler and retailer of parts for trucks and cars. Their business has four main segments. The largest segment by revenue is the Specialist Wholesale segment which services the truck and specialist wholesale markets. Of almost equal size is the Trade segment which supplies parts and equipment to automotive workshops. These each account for 36% of revenue.
The retail segment accounts for 20% of revenue and has storefronts selling parts and accessories to the general public. It includes well known brands such as Autobarn and Burson auto parts. The final 8% of revenue comes from New Zealand and includes trade sales and wholesaling.
Bapcor has almost 1000 locations spread across Australia and New Zealand plus a handful in Thailand.
The business primarily supplies parts for vehicles that are being serviced. This is concentrated in vehicles that are four or more years old. Therefore they benefit as the average age of cars on the road increases. They are not as heavily reliant on new car sales like some of their competitors such as GUD. Of more importance is the overall number of vehicles on the road and their age.
In Australia the average vehicle age is 11 years. This has been gradually increasing and is forecast to keep aging. In New Zealand the average age is 14 years. The number of vehicles on Australian roads is 21 million and forecast to keep growing. There are 5 million in New Zealand.
The trend towards more electric vehicles could be a long-term threat to Bapcor as EVs have fewer moving parts and therefore would need less replacement parts as they age. Bapcor are trying to get on the front foot in this regard. They have commenced a project to be a leading provider of parts for the increasing range of low emissions vehicles as well as providing accessories. Of course, some of the existing parts and accessories are also able to be utilised in EVs, for example brakes and wheel bearings and many others.
Bapcor is rated as a high Quality stock according to Stockopedia’s stock ranking system…
