Citi cautious on Australian small-cap auto part makers on inflation, fuel headwinds

ARB

06/09/2022 02:00

** Australian small-cap auto part and equipment makers could
face headwinds from increasing living costs that could impact
consumer demand, Citi says
    ** Brokerage is seeing "signs of improvement" in the sector
as data revealed new car sales jumped 17.3% in August, with
growth across all categories (https://bit.ly/3qapGfY)
    ** Says accelerating EV sales supporting passenger car sales
growth is a longer-term headwind for automotive and water
products maker GUD Holdings  GUD.AX  (neutral, A$8.75) and auto
accessories maker Bapcor Ltd  BAP.AX 
    ** Adds that BAP (buy, A$7.82) remains its top pick in the
small-cap auto sector on its relatively essential product
offering being "well placed" to outperform broader sector
    ** But along with inflation, Citi also sees rising fuel
prices adversely affecting consumer demand, with the
government's fuel subsidy set to expire at the end of the month
 urn:newsml:reuters.com:*:nFWN3090WZ
    ** Brokerage says weakness in 4-wheel drive vehicle
accessories maker ARB Corp  ARB.AX  (buy, A$39.25) - down 44% so
far this year - as temporary with long-term growth prospects
unchanged

 (Reporting by Sameer Manekar in Bengaluru)
 ((Sameer.Manekar@thomsonreuters.com; Twitter: https://twitter.com/sameer_manekar))