ARB: Home Is Where the Brand Is

Shares in ARB are expensive compared with our unchanged AUD 24.50 fair value estimate. We think the market is overestimating ARB's ability to replicate its Australian success offshore—particularly in the United States. We are yet to see evidence of the brand equity and retail price premium enjoyed in Australia translating to foreign markets. Revenue is up about 1% in the first quarter of fiscal 2024, with domestic aftermarket and original equipment manufacturer sales growth offset by an 8% decline in export sales. Despite largely flat revenue, aftertax profit was up about 10% on the previous corresponding period with improved gross margins and a mix shift to the more profitable domestic business. We make no change to our fiscal 2024 net profit after tax forecast of AUD 102 million—a 16% increase on fiscal 2023 as ARB cycles a relatively weaker second half.