AUTO PARTNER S.A. (APR.WA)

A founder-led and owned Polish auto parts disruptor with exclusivity contracts, selling for a P/E of 14.4, EV/EBIT of 10 and and a 50% discount to intrinsic value.

1. Key Facts

Description: Auto Partner SA is a founder-led and owned leading Polish distributor of spare vehicle parts. It purchases the merchandise in Asia and resells it in Poland and most of Europe (essentially the whole EU + UK and Balkans). It sells parts for cars, light commercial vehicles and motorcycles. It imports and distributes a wide product range including suspension, steering, braking and drivetrain systems, air conditioning and filters, shock absorbers, silencers, timing gears, etc. On top of that, it also sells equipment for small independent repair workshops which are its main customer group. A meaningful part of the revenue comes from the private labels too. The company was founded in 1993 and is headquartered in Bierun, Poland.

Track record: Over the last 10 years Auto Partner (AP for short) compounded revenue at a 27% CAGR (25.4% over the last 5 and 28.9% last year). It has also grown its BVPS at a 10-year 32% CAGR (29.5% over the last 5 years). Its ROIC improved from the 10-year average of 17.3% to a 3-year of 20.9% (last year was 18.9%). It has done all that while operating on a modest amount of debt with the debt to equity ratio typically below 50%. 

Market cap: As of the 8th of June 2024, its market cap is 3,174 million PLN (~$795 million). It has declined slightly since January 1, 2024, from 26.85 to 24.3 PLN per share. It is also ~35% up from its 52-week low.

Valuation: APR.WA trades at a TTM P/E of 14.38x (5-year average of ~12x), EV/EBIT of 10x (5-year average of 8.2x) and at a 50% discount to a conservatively calculated intrinsic value.

2. Business Overview

Background 

Auto Partner is a distributor of spare vehicle parts, which it purchases directly from the manufacturers and sells them to end users. It earns money by charging a margin on the parts that it’s reselling. Additionally many of the parts it purchases are imported. 

It sells all of the auto parts on a single platform, which is an online website where end users browse and shop for the spare parts directly. The company uses a kaizen costing system and a just-in-time replenishment system where the parts are delivered and replaced immediately after the customer’s purchase. The customers are typically repair shops and stores. The company’s main product lines are spare parts for European, Japanese, and Korean cars. On top of that, it also sells motorcycle and scooter parts.

The company sells all types of spare auto parts from all the key categories like suspension, steering, braking and drivetrain systems, air conditioning and filters, shock absorbers, silencers, timing gears, etc. As we can see their portfolio is very diversified:

This diversification is an important part of AP’s strategy and, I would argue, one of the components of its moat. This is because different auto parts can have different demand levels and some of them are more competitive than others. For instance, filters are more like FMCG (Fast Moving Consumer Goods) of the auto parts world and they sell quickly and well while the engine parts are more competitive and more seasonal. When one category sees a lower demand, AP’s diversified portfolio will provide useful defence with stable demand for some other categories. 

Private Labels