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.