Roth Capital Provides Key Takeaways From Investor Call With Gentherm Management
In a research note published Monday to investors, Roth Capital analyst Matt Koranda maintained a Buy rating on Gentherm (NASDAQ:THRM) with a $50 price target, following a conference call with investors and THRM CEO Dan Coker and CFO Barry Steele.
Koranda noted, “We would view recent weakness in shares as a buying opportunity as we don’t believe softness in the European automotive market materially impacts THRM’s growth outlook.”
The following bullets contain some highlights from the report:
- European revenues comprised ~25% of THRM’s $400mn in H1’14 revenues. We don’t believe that Ford’s Europe segment is a major customer of THRM. The European market typically consumes commodity-like seat heater products, which represents an opportunity for THRM, in our view, as the company could convert platforms to its higher ASP, higher margin CCS products. Additionally, a material portion of THRM’s Germany revenue is actually exported to the North American and Asian markets where the automotive outlook remains strong (~60% of THRM’s European sales are consumed in Europe per Q2’14 conference call).
- As the USD appreciates vs. other currencies there could be some minor headwinds to revenues, especially in Eurodenominated regions. Management sees more effect on Q4 figures vs. Q3. Our preliminary estimate suggests a ~$1mn headwind to revenues in Q3 if we hold Euro denominated revenues constant vs. Q2 and lower the average exchange rate to 1.34 vs. Q2 of 1.37. Q4 could see a larger impact from currency fluctuation, which is something to monitor.
- THRM’s goal is to grow a $30mn revenue business into a $100mn revenue business in 3-5 years, implying a mid-point ~35% revenue CAGR. Our preliminary estimate suggests GTE could contribute ~27c in EPS if it hits this growth target ($100mn at 15% EBIT margin, taxed at 35%).
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Matt Koranda has a total average return of -8.6% and a 20.0% success rate. Koranda is ranked #2874 out of 3315 analysts.