$曼格纳国际(MGA)$ Company Profile Magna is one of the world's leading auto parts suppliers. Its products for cars and trucks include panels, seats, bumpers, engines, doors, chassis, and interior and exterior components. Over the past several years, Magna has developed the capability to design and integrate complete systems, including the assembly of an entire vehicle. The company operates more than 310 plants in 28 countries.
Investment Rationale The North American auto sector has had a strong recovery from 2008-2009 lows, though we continue to see multiple drivers of earnings and share price growth, including: Global auto industry growth: Global production is projected to grow at a 3% CAGR through 2017, which should continue to benefit MGA. We expect US SAAR of 16.9MM in 2015E as the industry moves back toward long-term trend line of ~17MM.
Earnings leverage in Europe: Expect margin improvement from 3.0% in 2014 to 4.6% by 2016E. This is to be achieved through restructuring & streamlining efforts, and the exit from underperforming, non-core operations.
Emerging market growth: MGA has historically been underinvested in these areas, but is now investing heavily (organic and targeted acquisitions) to build its International footprint.
Balance sheet to be deployed: As MGA looks to reduce the excess cash held in the business, and move to a modest leverage position, we expect them to deploy capital on further dividend increases, share buybacks and potentially accretive acquisitions.
Attractive value for solid performance & growth outlook: MGA shares trade at an attractive 6.3x 2016E EBITDA, which is below the peer group average of 6.7x. With MGA's earnings growth outlook, diversification, global footprint,dividend and balance sheet, we believe that MGA should trade at least in-line, if not at a small premium, to this group.
Valuation $66 target price is based on a 6.5x EV/EBITDA and a 12.0x P/E multiple to a rolling four-quarter earnings forecast, starting in one year (Q2/16E-Q1/17E), and average these with a DCF calculation.This reflects our expectation of modest growth in North American production volumes, the beginning of a recovery in European volumes with gradual margin improvement, continued investment and growth in ROW, and continued share repurchases
Risk Risks to our price target and estimates include pace of auto industry recovery, macroeconomic factors,customer concentration and the financial health of those customers, pricing pressure, and sentiment/multiple recovery