Bapcor’s (ASX: BAP) underlying EBITDA fell 40% on last year to $77 million. The decline brings net debt/EBITDA at Dec. 31, 2025, to 3.4, precariously close to its 3.5 covenant. The company is raising $200 million in new equity, to nearly double the share count and cut pro forma net debt/EBITDA to 1.7.

Why it matters: Earnings have collapsed, and the second half is poised to be similarly poor and worse than we expected. The company is now guiding to underlying EBITDA of $150 million to $160 million, 31% below our prior forecast at the midpoint.

  • Trade is the big disappointment, with segment EBITDA down 33%. The once resilient Burson business is core to our valuation and Bapcor’s narrow economic moat, and is still the majority of earnings. But competitors in trade have pounced on Bapcor’s missteps and taken market share.
  • Our narrow economic moat was predicated on Burson being able to distribute parts more quickly and at better prices than most competitors. But the company has become uncompetitive in pricing, stock availability at branches has been hit, and trade revenue is falling.

The bottom line: We place Bapcor under review to assess our long- and short-term earnings assumptions, and Bapcor’s competitive position, including its economic moat. We expect to materially reduce our fair value estimate, with the dilutive impact of the equity raise alone a 45% fair value cut.

  • We will also provide a corporate action note to give shareholders our opinion and reasoning around the offer in time to assist the decision to participate. Despite earnings headwinds and significant dilution, the offer price of AUD 0.60 per share is likely to be attractive on valuation grounds.

Key stats: Bapcor is raising $200 million, fully underwritten, with a $150 million 1-for-1.36 nonrenounceable entitlement offer and a $50 million institutional placement.

  • The retail entitlement offer opens on March 5 and closes on March 19.

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