Strong Boat Demand Keeps Profitability Intact at Narrow-Moat Malibu; Valuation Attractive

We don’t plan to materially alter our $100 fair value estimate for Malibu Boats after digesting its fourth-quarter results and fiscal 2023 outlook, and view shares as attractive. Fourth-quarter performance evidences that the outdoor lifestyle remains paramount to consumers, with sales up 28%, thanks to a more than 10% increase in volumes and a nearly 16% increase in pricing. Such robust price rises indicate the brand continues to resonate with consumers (the key tenet underlying our narrow moat rating) while the willingness to trade up (mix and complexity of models) implies higher-income consumers are still less concerned about global economic conditions—the average selling price of Malibu’s boats was around $136,000. Although profitability was a bit weaker than we anticipated, with the firm delivering an adjusted EBITDA margin of 21% (versus our more than 22% estimate), we surmise some expenses surrounding supply chain and input cost inflation will prove transitory.