We Are Issuing a ‘Hold’ Rating for CAR Group With Strong Growth but Fair Pricing Amidst Broader Market Uncertainties

Key Takeaways CAR Group Limited (ASX: CAR) showed solid performance in H1 FY25, with proforma revenue and EBITDA both up 12%, reaching $548 million and $302 million, respectively. Net profit after tax (NPAT) also saw a 5% increase to $123 million. The company’s global operations are strong, especially in Latin America, where revenue grew by 30% and EBITDA by 34%. Asia also performed well, with 15% revenue and 12% EBITDA growth. In Australia, the dealer segment saw a 10% jump, and North America held steady despite challenges in the recreational vehicle market. CAR Group is in a good financial position, with a 95% EBITDA-to-cash conversion and a 12% boost in its interim dividend to 38.5 cents per share. That said, our valuation models, using a 9.5%-10.5% discount rate, suggest the stock is fairly priced between $24.5 million and $36.39 million. With broader market volatility and potential short-term price corrections, we’re issuing a “Hold” rating for now, recommending a wait-and-see approach for a better entry point. — CAR Group Limited (ASX: CAR) is a key player in the online vehicle marketplace space, with a strong presence in Australia, North America, Brazil, South Korea, and Chile. The company’s offerings include technology and advertising solutions aimed at improving the vehicle buying and selling experience. CAR Group’s global footprint and diversified portfolio across regions and product segments position it well for future growth, particularly in large, underpenetrated markets. CAR Group’s results for the first half of FY25 were robust, with solid revenue and earnings growth across all major markets. Proforma revenue and EBITDA were up by 12%, reflecting strong operational performance. Even with slightly lower reported results, CAR Group still saw a healthy 9% increase in both revenue and EBITDA, accompanied by a 5% increase in net profit after tax (NPAT). Additionally, the company declared an interim dividend of 38.5 cents per share, a 12% increase from the previous year, which highlights its solid cash flow generation and confidence in its financial position. Operational Highlights: Key Growth Drivers and Market Leadership Across Regions CAR Group achieved several key milestones during H1 FY25 that have bolstered its growth prospects. Webmotors in Brazil extended its market leadership, driving impressive financial outcomes. In Australia, the company made significant strides with its C2C payments platform, processing nearly $30 million in transactions, signaling strong future potential. Trader Interactive in North America showed resilience despite a challenging recreational vehicle market, and CAR Group saw substantial growth in Asia, with revenue up by 15%, driven by premium product offerings and home delivery services. Segment Performance Breakdown: Strong Performance Across All Key Business Areas Australia - carsales: The Australian market, under the carsales brand, delivered 9% growth in both revenue and adjusted EBITDA. The dealer segment was the standout performer, with 10% revenue growth driven by increased customer leads and deeper product penetration. The private segment saw a healthy 6% growth, supported by dynamic pricing and Instant Offer features. The media segment also grew by 10%, driven by better data insights, product diversification, and a competitive new car market. North America - Trader Interactive: In North America, CAR Group’s revenue and adjusted EBITDA grew by 9%. The North American operations were strong despite challenges in the recreational vehicle market, with media and depth products driving growth. As the recreational market improves, CAR Group is well-positioned for future growth in this region. Asia - Premium Products and Home Delivery Services Fuel Growth: CAR Group’s operations in Asia experienced impressive growth, with revenue up 15% and adjusted EBITDA up 12%. Key drivers included increased penetration of premium products, higher yields, and growth in home delivery transactions. We see substantial potential for continued growth in this region as CAR Group expands its offerings and strengthens its position in key markets. Latin America - Exceptional Growth Driven by Market Leadership in Brazil: CAR Group’s Latin American operations also showed impressive results, with revenue up 30% and adjusted EBITDA up 34%. The growth was primarily driven by webmotors’ continued market leadership in Brazil. This solid performance underscores the company’s ability to capitalize on its position in this high-growth region. FY25 Outlook: Solid Growth Expected Across All Key Segments Looking ahead, CAR Group is positioned to continue delivering strong growth in FY25. In Australia, we expect continued growth in dealer revenue, driven by higher lead volumes and deeper product penetration. The private segment should also see solid growth, supported by dynamic pricing and Instant Offer expansion. In the media segment, CAR Group is well-positioned to benefit from the continued growth of native advertising products and programmatic capabilities. Internationally, CAR Group expects good growth in North America, Latin America, and Asia. In North America, while price increases may be delayed, we expect revenue and EBITDA growth as the market improves. In Latin America, webmotors is poised to maintain its market leadership, driving strong revenue and EBITDA growth. In Asia, CAR Group expects continued strong performance in premium products and services. Technical Outlook: Caution Amid Broader Market Volatility: From a technical perspective, CAR Group’s stock has been consolidating within the $30 - $34 range. Given the current volatility in the broader market, we anticipate potential price corrections in the near term. As a result, we believe it is prudent to wait before increasing exposure to CAR Group until market conditions stabilize. Maintaining a “Hold” Rating with a Target Price of $38 Per Share: While CAR Group’s long-term growth prospects remain strong, we believe that the stock is currently fairly valued at its present market price. Given the broader market uncertainty and the potential for near-term price volatility, we recommend a “Hold” rating for CAR Group with a target price of $38 per share. We advise members to remain cautious and wait for a more favourable market environment before considering any increase in their positions. However, we continue to believe in CAR Group’s strong fundamentals and its ability to deliver value in the long run.

After reviewing CAR Group’s performance and valuation, we are issuing a “Hold” recommendation for now. We ran the numbers using several models, including revenue multiples, a Multi-Stage Discount Model, and 5-year and 10-year Discounted Cash Flow (DCF) Revenue Exit Models. We also compared CAR to its peers with Price-to-Book and Price-to-Earnings multiples. Our models, which factor in a discount rate of 9.5% to 10.5%, suggest that the fair value of CAR shares is between $24.5 and $36.39. CAR appears fairly valued at current price level. Strong Company Performance Across Key Global Markets but Fairly Priced at Present Levels CAR has been doing well across all its key markets, especially in Brazil with webmotors and in its other global segments. The company’s ongoing investments, like the C2C payment initiative in Australia, add significant long-term growth potential. So, while the business fundamentals are solid, the stock seems to be priced fairly at this point. Looking ahead, CAR’s growth is expected to continue, particularly in Latin America and Asia. That said, the stock could face some short-term market volatility, especially with the recent market sell-off. Right now, CAR is trading between $30–$34, and we think it’s best to hold off on increasing exposure until the market settles a bit. While CAR has strong potential in the long run, and its business is on solid footing, the stock seems fairly priced at the moment. We’re issuing a “Hold” for now, with the understanding that market conditions might shift. We’d keep an eye on it and look for a better entry point when the market stabilizes.

CAR Group has reported an impressive first half of FY25, with solid earnings growth across all key regions and a balance sheet that remains well-positioned for future expansion. The company’s diversified business model continues to generate strong financial returns, reinforcing its leadership in large, underpenetrated markets. Earnings Growth Driven by Strong Performance Across Core Markets On a proforma basis, CAR Group’s revenue increased 12% to $548 million, while EBITDA also rose 12% to $302 million. The proforma EBITDA margin held steady at 55%, demonstrating strong operational efficiency. These numbers provide the most accurate reflection of the company’s underlying performance, excluding the recent exit from the Australian Tyres business. For reported results, revenue climbed 9% to $579 million, while EBITDA rose 9% to $292 million. Net profit after tax (NPAT) increased 5% to $123 million, reflecting the company’s ability to drive profitability across its global portfolio. Robust Cash Flow Generation and Strong Balance Sheet Position CAR Group continues to translate its earnings into strong cash flow, with EBITDA-to-operating cash flow conversion at 95%. This level of cash conversion highlights the company’s efficient capital management and ability to reinvest in growth opportunities without overextending its financial position. The company maintains a disciplined approach to leverage, ensuring financial flexibility for both organic expansion and potential acquisitions. With a strong balance sheet and prudent financial management, CAR Group remains well-positioned to fund strategic investments while maintaining stability in an evolving macroeconomic environment. Segment Highlights Reflect Earnings Strength Across Key Regions In Australia, CAR Group consolidated its market leadership, driving 9% growth in revenue and Adjusted EBITDA. The Dealer segment grew 10%, supported by increased lead volumes and higher depth product penetration. The Private segment expanded by 6%, reflecting strong adoption of dynamic pricing and Instant Offer, while Media saw a 10% increase, fueled by improved advertiser diversification. North America’s revenue and Adjusted EBITDA rose 9% on a constant currency basis, proving the strength of the business model even in a more challenging recreational market. The continued success of media and depth products contributed to earnings resilience. Asia delivered strong double-digit growth, with revenue up 15% and Adjusted EBITDA rising 12%. The expansion of premium product adoption and increased home delivery transactions helped drive this performance. Latin America was a standout performer, with revenue soaring 30% and Adjusted EBITDA up 34%. The extension of webmotors’ market leadership position and increased audience engagement were key contributors to this earnings momentum. FY25 Outlook: Continued Earnings Growth with Prudent Financial Management Looking ahead, CAR Group expects continued proforma revenue, EBITDA, and Adjusted NPAT growth on a constant currency basis in FY25. EBITDA margins are anticipated to remain consistent, reflecting the company’s ability to sustain profitability while scaling its global business. In Australia, Dealer earnings should benefit from lead growth, depth product expansion, and yield improvements, while Private segment earnings are expected to gain from pricing optimizations and Instant Offer growth. The Media segment should continue expanding, driven by native ad products and non-automotive diversification. Internationally, earnings growth is expected across all regions. North America is set for steady revenue and EBITDA growth, albeit with a slight delay in planned price adjustments. Latin America should maintain its strong revenue and EBITDA growth trajectory, while Asia is expected to see good revenue growth and solid EBITDA expansion.

The company has declared a 50% franked interim dividend of 38.5 cents per share, representing a 12% increase from the prior corresponding period.