Portfolio

Inchcape's macro and FX risks mount, HSBC slashes target price

By Iain Gilbert

Date: Wednesday 17 Oct 2018

Inchcape's macro and FX risks mount, HSBC slashes target price

(Sharecast News) - HSBC slashed its target price on automotive distributor Inchcape to 650p from 840p on Wednesday.
The bank, which kept its 'hold' rating on Inchcape unchanged, said that macro and currency risks had all come to a head, leading to its "justified" reassessment the of firm's value.

HSBC pointed out that new car total industry volume across the UK had fallen 20.5% in September to 339,000, while diesel was down 43% - a marked decline on the first half that led to a significant revenue loss for Inchcape.

New car TIV fell 5.5% in Australia throughout September to 94,000, extending the measure's decline from the first half as a result of dwindling demand in New South Wales where weakening house prices had impacted demand for big-ticket purchases.

HSBC's analysts also felt that negative FX movements, driven by the impact of the strengthening of the Japanese yen against the Australian dollar, had led to an increase in the projected cost of exporting Subaru products to Australia.

"At current spot rates, this is expected to impact Australia reported treading profits by £20m in FY19e."

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