CT Automotive Group plc fuelled by ‘high margins and 2H22 volume recovery’, says broker (LON:CTA)

CT Automotive

CT Automotive plc (LON:CTA) is the topic of conversation when Liberum Capital Equity Research Analyst Edward Maravanyika caught up with DirectorsTalk Managing Director Darren Turgel for an exclusive interview.

Q1: CT Automotive announced its 1H22 results last week for the half year ended 30 June 2022. What what were the key takeaways? 

A1: I would highlight four things:

  • 1H22 EBIT result was broadly in line with our expectations.
  • Strong activity momentum at the beginning of 2H up to mid-Sept points to volume recovery in 2H22 that could be ahead of management’s original expectations by end of the year.
  • Costs being mitigated by China manufacturing location, which is not seeing as high levels of energy cost and wage cost inflation as elsewhere outside China.
  • Semicon supply issues have abated.  

Q2: Are there signs this positive momentum will continue in 2H ‘22 and beyond? 

A2: Yes, they feel the production schedules at customers are very encouraging, supported by backlog at the OEMs. However, they also flagged macroeconomic uncertainty is a key risk given prevailing macroeconomic winds.

Q3: Have your forecasts changed in any way?

A3: Largely kept intact.

Q4: Overall, why does CT Automotive represent an attractive investment right now?

A4: 2011-21 Production revenue 14% CAGR, compares to -2% pa auto production growth.

Recent events have eased pricing pressure: recent margins are the highest in 2 decades as structural supply-chain disruptions have reduced pricing pressure and supported margins. In turn, auto inventories have structurally shifted lower and unlikely to return to pre-pandemic levels. 

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