Humm Group: Earnings Recovery Likely

We believe no-moat Humm’s earnings will remain subdued in the near term, relative to the past three years. This is due to higher funding costs, increased bad debts, operating cost inflation, and competition limiting its ability to raise interest/fee charges. Despite the headwinds, we still expect earnings recovery from fiscal 2025 via growth in the less contested commercial financing space, tighter credit controls, and cost reductions. We expect normalized net profit after tax to recover to its fiscal 2021-23 average of AUD 65 million by fiscal 2027-28.