Citi adjusted its financial outlook for McMillan Shakespeare Ltd. (MMS:AU), reducing the firm's price target from AUD22.50 to AUD20.05, while still recommending the stock as a Buy. The reevaluation comes amid anticipations of a challenging fiscal year 2025 for the company, due to the impact of losing a significant government contract.
McMillan Shakespeare's forthcoming fiscal year is expected to be demanding as the company grapples with the repercussions of losing the South Australian government contract. This loss is projected to create an earnings gap that may not be entirely compensated by the increasing demand for electric vehicles (EVs) and novated leasing.
Citi notes that while there is a possibility for the order bank unwind and Oly to partially counterbalance the contract loss, rising yields are emerging as a new challenge.
Despite the anticipated difficulties in FY25, Citi maintains a positive outlook on the growth prospects for McMillan Shakespeare's novated leasing business. The firm's analyst believes that the National Vehicle Emissions Strategy (NVES) policy will act as a catalyst for EV demand, supporting the company's growth trajectory beyond FY25.
McMillan Shakespeare has not publicly responded to the revised price target or Citi's analysis.
The company's focus on novated leasing and the EV market remains a central component of its strategy, as it navigates through the changing landscape of the automotive financing industry.
Investors and market watchers will be closely monitoring McMillan Shakespeare's performance as it adapts to these challenges and opportunities.
The lowered price target reflects a cautious yet optimistic view of the company's ability to leverage policy changes and market trends to sustain growth in the longer term.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.