Besides Forvia´s restructuring, the thesis is a demand narrative for the period 2024/29. Adding volumes to a stable fixed cost structure that will leverage operating margins.
Just I do not see this sales growth happening. And operating leverage is a double edge sword.
Do you see further sector consolidation among Tier1s ?
You are right. Dependance on the demand is key here.
Attempting to simplify the question that will determine the thesis's topline is: Will more cars be sold annually from now until 2029? I believe the answer is yes. And Forvia will capture a portion of that. The topline of the thesis is very moderate. Then there's leverage with restructuring, being more penalized by debt + the capital cycle where there has been a lot of concentration.
Regarding further M&A, besides Dowlais + AXL, I don't see it, at least concerning large mergers, but who knows... For now, what's on the table is a spinoff of Continental AG's electronics division.
Forvia is a highly interesting stock, currently deeply in the penalty box. If the auto market recovers, it is totally possible for Forvia to print an EPS of ~5€. At a 7x EPS multiple, the upside is dramatic, while at the same time the downside seems to be limited...
I don't see Western OEMs yet. I share your narrative there. But it's different with auto parts, IMO. Even if expectations aren't met, there's a margin of safety with Forvia.
Didn't have time yet, but i want to study the spinoff. The spinned division is struggling hard with margins: Op. Margin 2% 2024 vs 5.5% from Electronics Forvia. A priori, it seems the value lies more in expulse dead weight from Continental's core business than in the spinoff. But, as I say, that's very much a priori.
German hardware engineering is great, but software eng is not that much promising. And for a culture of financial control, they simply built a fixed cost-empire with lot of candies in between. So much dead weight all over Conti. But for a culture of entrepreneurship and accountability, they are very wrong.
Pd. tier1s used to have upper hand with customers. But I dunno if this is broken.
Thnks. Great work.
Besides Forvia´s restructuring, the thesis is a demand narrative for the period 2024/29. Adding volumes to a stable fixed cost structure that will leverage operating margins.
Just I do not see this sales growth happening. And operating leverage is a double edge sword.
Do you see further sector consolidation among Tier1s ?
Thanks for your comment!
You are right. Dependance on the demand is key here.
Attempting to simplify the question that will determine the thesis's topline is: Will more cars be sold annually from now until 2029? I believe the answer is yes. And Forvia will capture a portion of that. The topline of the thesis is very moderate. Then there's leverage with restructuring, being more penalized by debt + the capital cycle where there has been a lot of concentration.
Regarding further M&A, besides Dowlais + AXL, I don't see it, at least concerning large mergers, but who knows... For now, what's on the table is a spinoff of Continental AG's electronics division.
Forvia is a highly interesting stock, currently deeply in the penalty box. If the auto market recovers, it is totally possible for Forvia to print an EPS of ~5€. At a 7x EPS multiple, the upside is dramatic, while at the same time the downside seems to be limited...
Too limited IMO. Totally agree. Thanks for the comment!
See the whole Auto more as a value trap though. Cheap.. but what for?.
Despite of potential interest reduction, in my view the Demand narratives won't play in the next 2 or 3-yrs.
Interesting how has Conti been developing (from a HoldCo to divesting pure players). Do you have any opinion / something to read on them?
I don't see Western OEMs yet. I share your narrative there. But it's different with auto parts, IMO. Even if expectations aren't met, there's a margin of safety with Forvia.
Didn't have time yet, but i want to study the spinoff. The spinned division is struggling hard with margins: Op. Margin 2% 2024 vs 5.5% from Electronics Forvia. A priori, it seems the value lies more in expulse dead weight from Continental's core business than in the spinoff. But, as I say, that's very much a priori.
German hardware engineering is great, but software eng is not that much promising. And for a culture of financial control, they simply built a fixed cost-empire with lot of candies in between. So much dead weight all over Conti. But for a culture of entrepreneurship and accountability, they are very wrong.
Pd. tier1s used to have upper hand with customers. But I dunno if this is broken.
Gestamp EV/EBIT 5x
- max REV & Earnings (EBIT €650m)
- min SH-p