Autoliv Inc analysts forecast
The future of Autoliv Earnings Prospects 2018/19?
Autoliv Inc (ALV:New York)
Autolivs electronic bussiness area know as Veoneer have been introduced to the stockmarket. You can now invest in this company alone without owning any Autoliv shares.
Since the spin-off and creation of Veoneer to the stock world Autoliv stock share have declined around 18% and continue to decline as I writte this article.
So whats left in the company? Well you have now only the passive safety systems like belts, aribags and steering wheel.
Veoneer as a company is not profitable.. yet. So this makes Autoliv even better without Veoneer in a short perspectiv if you have cash earning in your mind.
Veoneer’s operations are not profitable, so the postive results are affected as soon as possible by the knockout.
However the major growth areas have disappeared. Active safety and the self-driving system is the future and are expected to grow sharply over the next few years.
Car manufacturers have both premium cars and cheaper cars. But in the future there will be even more focus on safety of the passengers even if its a cheaper car in the emerging markets.
Also in future if the cars will be driven without an active driver there will be demand for new kind of airbags or seat belts.
Possibly because passenger and driver will be sitting differently in the car.
According to Autoliv’s calculations passive safety market is expected to grow faster then the production of passenger car.
It means an average market growth of 3 percent per year over the period up to year 2025.
Autoliv growth in the future will be even stronger because several of the company’s competitors have suffered from quality problems. Mainly Japanese Takata.
As a result, many of Takata’s customers have instead turned to Autoliv.
Autoliv has a 38 percent global market share. But if you look at the new orders intake you can see that the company has had about half of the world market in recent years.
So 38% is rather base case. I think around 42-45% would be more accurate.
This global market share makes estimate of revenue is approximately $ 10 billion and operating margin expected to be around 13 percent.
China suprised us with a recorded organic growth of 18 percent. Even in the US the organic increase was 13 percent.
Autoliv’s sales are geographically well-diversified. Europe last year accounted for 33 percent of sales and North / South America for 30 percent.
Asia accounted for 37 percent, with Japan accounting for 10 percent and China 17.
Among the well known automotive manufacturers basically all of them are on Autoliv’s customer list.
The biggest customers are, however, Renault / Nissan, Ford, Volkswagen and Hyundai / Kia.
The weaker profitability in the second quarter is explained by Autoliv with increased raw material costs, negative currency effects, increased research and technology costs.
The margin of 10.4 percent was lower than the average forecast for the report.
For the next three years, sales are expected to increase by 6-6.5 per cent per year, while the operating margin rises to 13.3 % in 2021. This means a profit growth of 15 % for that period.
The P/E for 2019 and 2020 are currently 9.5 and 8.3, respectively. According to 4traders, the direct yield in the stock is expected to be 3,18 % and over 3,2%.
The Autoliv share went very well just before the spin-off of what is now called Veoneer. After that, the remaining Autoliv has had difficulty defending its value.
A worse result than expected in the interim report contributed further to share price downfall.
Autoliv is determined to take good care of its new and old customers well. The company’s history is strong and especially in the recent years has been very successful.
In the next comming years, the fruits of these successes will be harvested.
The analysts expect the company to reach its targets for 2020. The full order book makes that outcome most likely, and in that case, the valuation looks attractive every year.
Even without rapid growth in the future, the Autoliv share, due to its dominant market position and strong history, is worth a higher valuation than p /e 8.
Swedendivin makes the thumb up sign.
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