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Amotiv Limited（AOV.AU）Investing in growth and resilience
UBS·2024-08-15 03:56

Investment Rating - The report maintains a Buy rating for Amotiv Limited with a 12-month price target of A13.00∗∗[5][6]−Thestockisconsideredcheapat∗∗12xP/E∗∗,withafairvaluecloserto∗∗15xP/E∗∗basedonasum−of−the−parts(SOTP)valuation[2]CoreViews−Thecompanyhasshownsignificantbalancesheetimprovement,withgearingreducedfrom∗∗ 2.6xin1H23∗∗to∗∗ 1.6x∗∗currently[2]−Earningsgrowthisexpectedtoaccelerate,with∗∗EBITAgrowthof1113.00** [5][6] - The stock is considered cheap at **12x P/E**, with a fair value closer to **15x P/E** based on a sum-of-the-parts (SOTP) valuation [2] Core Views - The company has shown significant balance sheet improvement, with gearing reduced from **~2.6x in 1H23** to **~1.6x** currently [2] - Earnings growth is expected to accelerate, with **EBITA growth of 11% forecasted for FY26e**, up from **3% in FY25e** [2] - The company has made progress in cash conversion, achieving **93% cash conversion**, better than the UBSe estimate of **85%** [3] - New business wins are expected to contribute more materially from **2H25e onwards**, supporting long-term organic growth [2] Financial Performance - Revenue for FY24 was **987m, an increase of 8% y/y, in line with consensus estimates [3] - EBITA for FY24 was 195m∗∗,up∗∗5195m**, up **5% y/y**, supported by a strong **4WD&T EBITA margin of 18.0%** [3] - Operating cash flow declined by **17% y/y to 171m, cycling a strong comparison period [3] - Net debt stands at 329m∗∗,withanetdebttoEBITDAratioof∗∗1.6x∗∗,atthelowerendofthetargetrange[3]EarningsandValuation−MinimalchangesweremadetoEPSforecasts,with∗∗FY25eEPStrimmedby2329m**, with a net debt to EBITDA ratio of **1.6x**, at the lower end of the target range [3] Earnings and Valuation - Minimal changes were made to EPS forecasts, with **FY25e EPS trimmed by 2%** and **FY26e EPS unchanged** [4] - The price target of **A13.00 is based on a DCF valuation (9.2% WACC) and SOTP valuation (11.1x EBITA) [5] - The stock is trading at a 12.2x P/E for FY25e, with a forecasted EPS growth of 12.6% in FY26e [7] Business Segments - The 4WD & Trailering segment saw revenue growth of 5% y/y to 349m∗∗,thoughitwas∗∗3349m**, though it was **3% below UBSe estimates** [9] - The **LP&E** segment grew **13% y/y to 324m, slightly above UBSe estimates [9] - The P&U segment grew 6% y/y to 314m∗∗,inlinewithUBSeestimates[9]ForecastsandOutlook−Revenueisexpectedtogrowby∗∗6.1314m**, in line with UBSe estimates [9] Forecasts and Outlook - Revenue is expected to grow by **6.1% in FY25e** and **7.6% in FY26e**, reaching **1,127m by FY26e [7] - EBIT is forecasted to grow by 12.2% in FY26e, driven by stronger performance in the 4WD & Trailering and LP&E segments [7] - The company has flagged additional product development and greenfield investment, which is expected to support future growth [3]