Challenger Earnings: Past Efforts Now Bearing Fruit

No-moat Challenger delivered a solid fiscal 2024 result, with underlying NPAT rising by 14% from the prior year to around AUD 417 million, broadly in line with expectations. Underlying pretax profits of AUD 608 million slightly exceeded our forecasts, though this was offset by higher taxes. A positive surprise was stronger group profitability—driven by higher net yields from product sales and lower operating expenses. The firm’s guided profit growth of around 10% for fiscal 2025 (assuming the midpoint of the range) aligns with our forecasts and supports our expectations for ongoing earnings growth. We slightly increase our fair value estimate to AUD 7.50 per share from AUD 7.40, reflecting improved long-term maintainable cash flow projections that now assume higher business profitability.