'Stronger-than-expected sales to drive a re-rating' of this ASX 200 share: Goldman

This ASX 200 share could be about to rebound according to Goldman Sachs…

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The Super Retail Group Ltd (ASX: SUL) share price is having a tough year.

Since the start of 2022, the retail conglomerate's shares have lost 19% of their value and are currently fetching $10.24.

Can the Super Retail share price rebound?

The good news is that one leading broker is predicting a big rebound from the Super Retail share price in the next 12 months.

According to a note out of Goldman Sachs, its analysts have initiated coverage on the company with a buy rating and $13.80 price target.

Based on the current Super Retail share price, this implies potential upside of 35% for investors between now and this time next year.

But it gets better. Goldman is also forecasting a fully franked 59 cents per share dividend in FY 2023. This implies a potential yield of 5.8%, stretching the total potential return to over 40%.

Why is Goldman Sachs so bullish?

Goldman Sachs has previously spoken about how it believes consumer data will be extremely important for retailers in the future. So, it was pleasantly surprised with Super Retail's recent results and commentary, which appear to indicate that the company is ready for battle in this regard. It explained:

We continue to believe that the next battle of AU retail is to be won on consumer data and digitalization, along the entire consumer journey (AIPL) and leveraging the whole company's value chain.

While we have seen leaders emerge in the Staples categories (WOW and EDV), discretionary retail in Australia have generally lagged in investments (though WES is investing heavily). One standout exception is SUL.

Since the introduction of its new digital focused strategy in 2019, the company has focused on membership, consumer data and omni-channel execution at the forefront of its strategy.

While acknowledging that it is still early days, the broker believes that "further investments in personalized offers and loyalty should continue to build defense into the business, and grow unique customers (~7.7mn as of FY22) and ARPU (~A$266/pp as of FY22)."

The broker expects this to boost margins above market expectations.

In light of this and its attractive valuation, the broker has initiated coverage with a buy rating. It suspects that a re-rating could be in order in the future. Goldman concludes:

Our estimates are ~10% above FactSet consensus in FY23E/FY24E due mainly to more defensive sales vs. expectations. Additionally, the company is currently trading at 11.4x FY24 P/E, vs. our TP implied FY24 P/E of 14.8x. We expect consistent delivery of stronger-than-expected sales to drive a re-rating in the stock.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Super Retail Group Limited. The Motley Fool Australia has positions in and has recommended Super Retail Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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