BRP: Intangible Asset and Cost Prowess Warrant a Wide Moat Rating; Shares Cheap

We recently upgraded our moat rating for BRP to wide from narrow, after considering the evolution of performance and profitability at the firm. In turn, this led to an increase in BRP's fair value estimate to CAD 135 ($106) from CAD 129, as we expect the firm to capture excess economic returns over a longer period. But the market has taken a gloomier outlook on shares, which trade at a 20% discount, placing too much weight on near-term challenges surrounding consumers' appetite to spend against a weak economic backdrop. However, we believe such behavior is transitory and won't hinder the long-run positioning of BRP's top notch brands, which have supported the firm's intangible asset.