The Nordic region has always had a very strong capital goods sector, particularly in Sweden, with global leaders such as Atlas Copco, Sandvik, SKF etc. Therefore, the sector has always been a special area of focus for us, even outside the Nordics, which is why our newest addition to our top-pick list is actually headquartered and listed in Germany.
Founded in 1934 in Koblenz, Germany, Stabilus is a world market leader for gas springs and dampers applied in the automotive industry, the furniture sector, in house and building technology and even in medical products as well as rehabilitation technology. Stabilus products are not immediately visible to the users. Nevertheless, almost everybody experiences on a daily basis the ergonomic relief provided by the gas springs, dampers or electromechanical drives manufactured by the company. Whether opening and closing the trunk of a car, stowing hand luggage on an aircraft, adjusting the backrest of a desk chair, or lying down on a height-adjustable treatment bed in a doctor’s surgery: Stabilus products facilitate ease of operation in all kinds of places. For the majority of its products, Stabilus is the sole supplier worldwide, which naturally gives the company a large market share.
In its report for its fiscal Q2 2015, Stabilus reported revenues of EUR 157.5m (+21.3% y-o-y) and an EBIT of EUR 18.1m (+29.3% y-o-y).
The revenue split looks as follows (by segment and by region):
Stabilus “Powerise”, the company’s electromechanical lid drive, is particularly interesting. It allowed the company to switch from being a component supplier to a system supplier for the automotive industry. One simple example of its functionality is the automatic operation of automobile tailgates, which can be opened or closed at the press of a button thanks to the Powerise drive. More and more manufactures are offering their customers this option in a growing number of vehicle models. Whereas the automatic tailgate was previously only available on luxury cars, it is now also offered in mass-market models. Stabilus is also working intensively on new potential applications for Powerise technology in industry. Currently accounting for some 20% of total revenues, Powerise grew by 67% y-o-y during the fiscal H1 2015.
With roughly 50% of sales coming from outside of Europe, Stabilus is benefitting from the recent weakness of the Euro against the US-dollar. Stabilus recently also took advantage of the low-interest environment and refinanced an obligation which originally was set to expire in 2018. The company thereby managed to reduce its annual interest payments by EUR 13m.
Management has guided for FY 2015 revenues of EUR 575 – 585m and an adjusted EBIT margin of 12-13%. According to German finance portal www.finanzen.net, analysts are expecting Stabilus to report FY 2015 revenues of EUR 591.3m and FY 2016 revenues of EUR 639.7m. Current EPS estimates are EUR 2.07 for 2015 and EUR 2.55 for 2016. Analysts are also expecting Stabilus to pay its first dividend with estimates ranging between EUR 0.20 and EUR 0.53 per share. Net debt/EBITDA is expected to be at 2.1x at the end of 2015 and 1.6x by the end of 2016.
In combination with the current share price level of around EUR 33, the analyst estimates imply a valuation of:
PE-ratio 15.8x 2015 EPS and PE-ratio 12.9x 2016 EPS
EV/Sales 1.5x 2015 and EV/Sales 1.38x 2016
Dividend yield 1% 2015 and 1.6% 2016
EV/EBITDA 8.7% 2015 and EV/EBITDA 7.5x 2016
P/BV 7x 2015, P/BV 5x 2016
We find the valuation attractive given Stabilus strong market position in fast growing market segments. The company is benefitting from on of the mega-trends of our times – the growing demand for ergonomics, which is also a consequence of longer human life expectancy. Nordic Investor has therefore started to build a position in Stabilus.
For more information Stabilus has provided a corporate video: