Akwel, a profit capacity that is still little valued

In a sector heavily penalized by the crisis, the automotive supplier Akwel is playing special music. While its turnover fell by 31.7% in the first half, to 387 million euros, the fluid and mechanisms management specialist posted current operating income of 24.3 million, i.e. operating margin of 6.3% against 8.3% a year earlier. Net profit for its part amounted to 20.2 million euros, down 43%.

Achieving, while the global automotive market was at a complete standstill, an operating margin down only two points, after a record financial year in 2019, and a substantial net profit constitutes a unique performance among automotive suppliers, which mostly recorded operational losses over the period.

Faced with the same horrors as its peers – plant shutdowns, the difficulties of its manufacturer customers, disruptions in supply chains – Akwel has been able to demonstrate responsiveness and flexibility, for example by optimally reducing its costs.

On the lookout for acquisition opportunities

However, there is no excess of optimism. The end of the year still looks uncertain. Admittedly, the cumulative turnover achieved in July and August fell by only 4.6% (to 153.5 million), but the group still mentions “very limited market visibility”. It therefore intends to continue to adapt to the economic situation, once again adjusting its workforce.

While waiting for better days in terms of activity, the family equipment manufacturer could emerge from the crisis intensified. Like its takeover of a supplier at the bar of the Commercial Court. With its solid financial structure, with positive net cash of 7.7 million euros as of June 30, Akwel remains on the lookout for external growth opportunities.

Its objective is to strengthen its positions with its strategic customers, and to increase its development in product lines related to new engines (hybrid, electric or hydrogen). It also intends to continue its investments to meet market expectations in terms of clean vehicles.

Based on the estimated profits for 2020 and 2021 (31.5 and 41 million euros respectively), the respective Per is 14.2 and 11 times. Which remains moderate even if the title has never paid dearly. These levels are all the more reasonable as these estimates are very conservative, and are based on a gradual recovery in the automotive market. A good surprise cannot be ruled out.

On the other hand, the group’s ability to remain profitable in all circumstances and its debt-free balance sheet could lead the markets to review the valuation levels they apply to it.

Our advice: Buy Akwel at 16 euros to aim for 19 euros. Isin code: FR0000053027.

The Akwel article, a still little valued earning capacity appeared first on La Lettre de la Bourse.

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