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Inchcape initiated at ‘add’ as Peel Hunt eyes long term opportunity post-coronavirus

Peel Hunt said the car dealer's revenue mix and cost base flexibility “should support underlying profitability and cash generation” as the pandemic subsided

Inchcape - Inchcape initiated at ‘add’ as Peel Hunt eyes long term opportunity post-coronavirus

Inchcape PLC (LON:INCH) presents a long-term opportunity despite short term uncertainty caused by the coronavirus pandemic, according to analysts at Peel Hunt.

In a note on Friday initiating the car dealership at ‘add’ with a 600p target price, the broker said while the company’s revenues and profitability had been hit in April due to lockdown measures, trading was “recommencing across key territories” and they were “encouraged by the proactive cost management through the crisis”.

READ: Inchcape sales fall and activity levels expected to be subdued for some time

“The strategic, operational and financial attractions of the distribution-led model should be further validated post the [coronavirus] crisis”, Peel Hunt said, adding that the company’s revenue mix and cost base flexibility “should support underlying profitability and cash generation”.

“We also expect [original equipment manufacturers] to support and accelerate distributor consolidation in order to better exploit post-[coronavirus] opportunities”, the broker said.

“We initiate with an Add recommendation, with a view to turning more positive as visibility improves on the pace of recovery”, Peel Hunt concluded.

In a trading update in May, Inchcape reported a 32% decline in sales in the first four months of the year as a good start to 2020 veered off course as a result of the pandemic.

Shares in the firm rose 0.7% to 495p in mid-morning trading.

Quick facts: Inchcape

Price: 431.6 GBX

LSE:INCH
Market: LSE
Market Cap: £1.7 billion
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