BorgWarner Inc.
BWA Details
BorgWarner Inc. (NYSE: BWA) provides clean and efficient technology solutions for usage in combustion, hybrid and electric vehicles. It has manufacturing and technical facilities in 96 locations across 23 countries.
Result Performance for Q3FY21 (For the Quarter Ended 30 September 2021)
- Net sales stood at $3,416 million for Q3FY21, up 35% YoY primarily led by the acquisition of Delphi Technologies and increased demand that was partially offset by the decline in industrial production.
- Net earnings for Q3FY21 were $96 million, or $0.40 per diluted share, and Adjusted net earnings per diluted share for Q3FY21 were $0.80, down from adjusted net earnings per diluted share $0.88 for Q3FY20.
- Adjusted net earnings for Q3FY21 excluded net non-comparable items of $(0.40) per diluted share. Adjusted net earnings for Q3FY20 excluded net non-comparable items of $(0.35) per diluted share.
Source: Company Reports, Analysis by Kalkine Group
Key Updates
- On 11 January 2022, the company plans to release its Q4FY21 and FY21 Results Conference Call on 15 February 2022 @ 9:30 am Eastern Time.
- On 11 January 2022, Qnovo announced the closing of $24 million in Series-C financing. BWA led the round with phenomenal participation by OGCI Climate Investments and Constellation Technology Ventures.
- On 11 January 2022, the company announced its investment in Qnovo, Inc., a privately held, Silicon Valley-based software and controls company.
- 6 January 2022, Atar Capital announced that it had closed the carve-out acquisition of BorgWarner’s North American Controls (BWNAC) business, a wholly owned and operated division of BWA.
Outlook
For FY21, net sales will be $14.4-$14.7 billion if the semiconductor supply issues do not worsen and there are no new production disruptions due to COVID-19. This indicates a YoY increase in organic sales of 8.5-11%. The company anticipates its weighted light and commercial vehicle markets to be down ~2.5% to flat in 2021. The acquisition of AKASOL is expected to increase YoY sales by ~$70 million. Foreign currencies are expected to result in a YoY rise in sales of ~$425 million primarily due to the strengthening of the Euro, Chinese Renminbi and Korean Won against the U.S. dollar.
Key Risks
The company operates in a rapidly changing global regulatory environment and is exposed to several regulatory requirements. Any sharp decline in automotive or truck production would hurt its sales performance. Further, intense competition and increasing commodity costs are some other potential risks.
Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)
Stock Recommendation
The company has delivered a 6-month and one-year return of ~-2.34% and ~+11.05%, respectively. The stock is trading higher than the average price of the 52-week low-high range for the stock at $38.015–$55.55, respectively.
The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). A slight discount has been applied to peer average EV/Sales multiple (NTM) (Peer Average), considering decreased ROE at 1.4% in Q3FY21 versus 2.4% in Q3FY20 and ROIC at 0.9% in Q3FY21 versus 1.5% in Q3FY20.
Considering the technical analysis, recent returns, risks associated, and current trading levels, we believe it is prudent to book profits in the stock. Thus, we give a “Sell” recommendation on the stock at the current market price of $49.18 per share, as at 9:30 am USA Eastern Time as of 19th January 2022.
Technical Overview
Daily Price Chart
Source: REFINITIV
BorgWarner Inc. (BWA) is a part of Kalkine’s Global Fully Charged Product
Dana Incorporated
DAN Details
Dana Incorporated (NYSE: DAN) provides power-conveyance and energy-management solutions for vehicles and machinery. The product portfolio improves light vehicles, commercial vehicles, and off-highway equipment efficiency, performance, and sustainability.
Result Performance for Q3FY21 (For the Quarter Ended 30 September 2021)
- The sales for Q3FY21 totaled $2.20 billion, versus $1.99 billion in Q3FY22, indicating a $210 million improvement led by strong customer demand in heavy-vehicle markets.
- Adjusted EBITDA for Q3FY21 was $210 million versus $201 million for Q3FY20. Profit margin compression in Q3FY21 was primarily driven by raw material cost inflation.
- Net income attributable to the company was $48 million for Q3FY21, up $3 million YoY.
- Diluted adjusted EPS were $0.41 in the Q3FY21 versus $0.37 per share in the Q3FY20.
- Operating cash flow in the Q3FY21 was a use of $75 million versus $321 million of operating cash flow in Q3FY20.
Source: Company Reports, Analysis by Kalkine Group
Recent Update
- On 7 January 2022, the company stated that it entered a contract with Icahn Capital, whereby Brett Icahn and Gary Hu, both of whom are portfolio managers at Icahn Capital, will join its board effective immediately.
- On 4 January 2022, the company announced that Ernesto M. Hernández had been appointed to the company's board, effective immediately.
Outlook
As per the management, the challenging market dynamics have pressured the outlook for the remaining period of 2021. The adjusted guidance is mainly led by customer production levels that were lower and less consistent than earlier and by commodity inflation. Though the near-term direction remains constrained, the current market dynamics indicate robust cyclical growth and capabilities to achieve above-market growth led by the transition to electrified mobility. Sales of $8.8-$9 billion are expected in FY21, Adjusted EBITDA of $815-$875 million, with implied adjusted EBITDA margin of ~9.5% and diluted adjusted EPS of $1.65- $2.05 per share, and operating cash flow of ~5% of sales.
Key Risks
Rising interest rates, changes in international legislative and political conditions could impact the business. Labour stoppages and disruption in supply chain management could disrupt the operations and adversely affect the business. The company could be involved if unable to recover portions of commodity costs from the customers.
Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)
Stock Recommendation
The company has delivered a 6-month and one-year return of ~+2.89% and ~+8.5%, respectively. The stock is trading higher than the average price of the 52-week low-high range for the stock at $18.845–$28.44, respectively.
The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). A slight discount has been applied to peer average EV/Sales multiple (NTM) (Peer Average), considering supply chain constraints, rising input costs, and labour shortage. Also, the total revenue was unchanged in Q3FY21 due to lower gain on sale and fee income primarily led by a change in securitized asset mix and lower advisory fee generating opportunities. Also, the management stated that challenging market dynamics have pressured the outlook for the remainder period of 2021.
Considering the technical analysis, recent returns, risks associated, and current trading levels, we believe it is prudent to book profits in the stock. Thus, we give a “Sell” recommendation on the stock at the current market price of $25.13 per share, as at 9:30 am USA Eastern Time as of 19th January 2022.
Technical Overview
Daily Price Chart
Source: REFINITIV
Dana Incorporated (DAN) is a part of Kalkine’s Global Fully Charged Product
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.