CIBC World Markets Inc. raised its price target on shares of Dorel Industries Inc. (TSE:DII.B), a juvenile products and bicycle company, to $32 from $31, while maintaining its "Sector Outperformer" rating.
After the company's fourth quarter results, the brokerage reduced its 2012 EPS estimate to $3.37 from $3.44, while introducing its 2013 estimate of $3.75.
Dorel reported Q4 results that were essentially in line with CIBC's expectations on a consolidated basis. Juvenile put up a decent result, though earnings were held back by elevated operating expenses. Rec/Leisure was short of expectations. Adjusted EPS were $0.54, just below CIBC's $0.55 forecast.
While challenges remain, specifically in Europe, U.S. Juvenile has begun to recover. Bikes should continue to grow, albeit at a more modest pace. 2012 appears to hold modest growth potential based on stabilized demand; margins should improve, bearing a spike in commodities.
The brokerage is introducing 2013 estimates, with revenue growth of 3.2%, EBITDA up 5.4% (18 bps), and EPS up 11% to $3.75. Free cash flow has returned close to historical levels and remains attractive.
With little change to CIBC's forecasts and no changes to target multiples, its price target increases only to $32 based on 2012 estimates. Dorel trades at a meaningful discount to peers and historical multiples, and the firm continues to see good value in Dorel shares.
Trading of DII.B stock remains unchanged from yesterday's close of $26.65.