Boyd Group Services Inc (TSX: BYD) is a personal services company which provides auto body and auto glass repair services at its portfolio of facilities located in the United States and Canada. The Company operates in Canada primarily under the Boyd Autobody and Glass brand name, while its most notable U.S. brand is Gerber Collision and Glass.

The group has closed its bought deal financing where it had raised CAD 231.5 million by allotting its share at a price of CAD 183.00 per share. The group is likely to use the proceeds to fund future growth opportunities.

Q1FY20 Financial Highlights: For the period ended March 31, 2020, BYD reported an impressive set of numbers and posted total sales of CAD 628.35 million, reflecting a 12.6% growth over Q1FY19. The growth was driven by new stores added during the quarter, coupled with a higher U.S. dollar exchange rate. Gross profit stood higher at CAD 281.38 million, higher than CAD 252.98 million in pcp, thanks to the improved top line while the higher cost of sales remained a drag. Adjusted EBITDA, during the quarter, stood at CAD 81.42 million, as compared to CAD 78.32 million in the previous corresponding period. The increase was supported by positive contributions from the new locations. Total expenses stood higher at CAD 251.54 million, significantly higher than the previous corresponding quarter due to higher operating expenses, depreciation & amortization costs coupled with higher finance costs. Net earnings stood at CAD 22.65 million against CAD 21.39 million in pcp.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock of BYD corrected ~6% so far this year, outperforming the index by ~5%. The Company witnessed a drastic reduction in demand in late March as it declined ~40% to 50% from the normal level. The group mentioned that demand started improving in April and May, but it is still down less than 40% from the normal level. The Company has taken certain measures to improve the cost structures, such as staff reductions, salary and other compensation adjustments, lease payment deferrals, reductions to other variable expenses, restrictions on capital expenditures. The above measures are likely to provide cushion to the operating profit and cash flows. The long term- business model remains strong aided by the combination of organic growth coupled with acquisitions and new store development. Further, the Company is accumulating funds through private placement and would use them for future expansion. The stock is trading at a forward EV/EBITDA multiple of 15.2x, which is higher than the industry (Consumer – Non-Cyclical) average of 14.8x. Hence, considering the aforesaid facts, we recommend a 'Watch' stance on the stock at the current market price of CAD 193.71 as on June 15, 2020.

BYD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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