Mainfreight (MFT) Recession Proof

Mainfreight’s (MFT) Annual Shareholder Meeting trading update highlights an outstanding recovery in profitability following a tough COVID-19 impacted start to FY21. Profit before tax (PBT) is up ~+20% for the first four months of the year on revenue growth of ~+8%. This implies a very strong result for June and July, given early COVID-19 trading challenges through April and May. While performance of all regions has improved in recent months, the key driver of the profit uplift is Australia, where robust revenue growth and very impressive margin expansion is evident. Elsewhere Asia has also grown earnings year on year, albeit from a lower base. In contrast New Zealand, Europe and the Americas have all seen PBT and margins decline. MFT’s approach to branch autonomy enables cost and margin management at a local level. Its greater focus on sales is evident, which in contrast to competitors that have shed headcount, is helping to drive market share gains. While the outlook retains an element of uncertainty, MFT has demonstrated that it can successfully navigate a challenging industry backdrop
better than its competitors. We lift our target price to NZ$47 (from NZ$40). Reiterate OUTPERFORM.