brembo: a solid company at a fair price (that could be soon at a discount)

by:JHY     2019-11-30
Brembo (OTC:BRBOF)
Is the world\'s leading and recognized innovator in automotive disc brake technology.
The company provides high-performance braking systems for the world\'s most important manufacturers of automobiles, commercial vehicles and motorcycles, as well as racing clutch and other components.
Brebo is also a leader in the racing industry and has won more than 300 titles.
For example, use the brebo brake in a Ferrari car.
Today, the company operates in 16 countries on three continents, with 24 production and business sites and about 10,000 employees. About 10% of them are engineers and product experts active in R & D.
Turnover is 2015 euros (12. 31. 2015).
Brebo is the owner of the brand brebo, Breco, AP, Bybre and Marchesini and operates through the AP Racing brand.
This video explains the company\'s profile.
Brebo has experienced tremendous growth in the past few years.
The following figure shows that revenue has climbed continuously from 1 euro.
EUR 2B to EUR 2B + increased by 15% from 2014 to 2015. (
Source: company website)
The reason for this growth is the innovation culture behind the company (
More will be introduced later).
In the third quarter of 2016, revenue increased by more than 11% compared with the same period last year.
Growth has slowed recently but remains strong. (
Source: company website)
Profitability also showed a similar surprising result.
Over the past 12 months, EBITDA has grown by more than 20% in the quarter.
Operating income climbed from the euro in 2011 to the euro in 2015 (CAGR of 25%).
In the same period, the return on investment increased from 11% to 28. 6%. (
Source: company website)
Brebo is not only profitable and efficient, but also has a solid balance sheet.
At the end of the 2016 quarter, brebo had a net debt position of 256 m, of which the euro was a long-term debt.
Long-term debt is 85.
1%. Financial stability was ensured.
This debt position is very low compared to EBITDA and equity (€820M).
Geographical distribution brebo is an Italian company that can bring various risks.
Italy, however, accounts for only a small portion. 11%)
For the overall market of brebo.
Germany is the strongest and most resilient country in the European market, with revenues almost equal to one quarter.
China and the UK are also big markets, with North America accounting for 30% of total sales. (
Source: Company Introduction)
In terms of production, the group employs nearly 10,000 employees.
The company currently operates through 15 countries on three continents where it manufactures and commercial sites are located.
In addition to Italy, there are production plants in Germany, Poland, the United Kingdom, the Czech Republic and the United States. S.
Brazil, Argentina, China and India.
Increased investment of € 154 in 2015 alone, of which more than € 40 in Italy, it remains one of brebo\'s most invested in R & D and maintaining technology cuttingedge plants.
The remaining amount is mainly invested in central-
North America, China, Poland and the Czech Republic.
As a result, the company will benefit from a weak European currency because its cost is primarily the euro, but a large part of its income is the dollar or other currency.
In North America, the construction of a casting building is about to be completed.
A steel foundry in Michigan, near the new homer plant, which began operations in the first few months of 2016, allowing brebo to start the vertical integration process of production capacity in the United StatesS. as well.
In a recent interview, the North American CEO explained the choice: In Mexico, a new foundry and factory for the processing and assembly of aluminum calipers was completed in October 2015, supply ASIA and Triamcinolone Acetonide and Neomycin Paste to major European countries
North American manufacturer.
In addition, in this case, the Mexican peso weakness may reduce the cost of the company, but of course Trump\'s tariffs may cause problems.
However, the company\'s investment in Michigan could provide some political leverage on tariffs.
In an article in The Wall Street Journal, Alberto bombasse, chairman and managing director of brebo, announced: given that this is a company that wants to invest in the United StatesS.
It may have political influence to protect its position in Mexico.
And, in the case of protectionism, its U. S.
Compared with low-cost producers in other countries, investment will eventually be more competitive.
I always read the annual letter to shareholders.
The chairman highlighted the company\'s future plans in 2015 letter: I thank them for their intention to further increase their presence in key markets such as the United StatesS.
To reduce the importance of the European market.
In addition, the emphasis on R & D is the key to maintaining the competitive advantage of brebo and future growth.
The chairman continued: First of all, I like the long-term approach.
The chairman is talking about a decade, not a few quarters.
Second, the company is working hard for the next generation of cars.
For example, he mentioned the mechatronics system.
These systems are smarter than the current ABS braking system because they combine more sensors to align with driverless cars to improve safety and responsiveness.
At present, there are no more future-oriented cars than Tesla (NASDAQ:TSLA).
Recently, brebo was selected to provide car brakes for Tesla\'s Model S and Model X.
This confirms the future potential of the brebo brand.
Competitive advantage brebo is the top brand of high performance brakes.
It was also used in the movie Speed and passion 6.
This video explains why they chose brebo.
The company\'s brakes are also used in most high-rise buildings.
Performance car.
It is also worth noting that although brebo is a car part, its brand is recognizable.
Does anyone know which company produced their mirror?
Or their lights?
In this environment, brebo is one of the few brands that stand out.
Not many people will spend more money buying a mirror from a particular brand, but some customers will realize that their car uses brebo brakes.
This is a strong competitive advantage in this limited differentiated product.
Andy Warhol even painted the brebo brakes!
In addition, as mentioned earlier, brebo has invested heavily in R & D.
Innovation and technology are the key to differentiated competition.
These strong investments have made the company a market leader in the automotive industry.
As mentioned by the chair, brebo focuses on the mechatronics system of the future brake system and the development of new structural materials.
Through these activities, we are ready for the market demand in the next few years. When a strong drive to the electrified vehicle will result in a significant integration of the braking system with the rest of the vehicle and constantly looking for weight --
Restore the solution.
Brebo\'s goal is to create a brake system that seamlessly integrates the brake system with other sensors on the car and creates conversations between these systems such as electric drive motors and new suspension-
Concept of steering
Finally, the active safety is improved, and the functions such as regenerative braking are optimized.
Other developments involving system integration have been in the research phase for some time, especially in the next phase of power-driven systems and related
Generation Architecture.
In the advanced stage of research, it is also an innovative car wheel.
Side structure with electric drive motor and electronic control brake integrated with pass brake.
Research and development does not guarantee success or future competitive advantage, but it will certainly help.
In this article, I discuss the technologies of the future, including self-
Driving a car can bring a return on investment.
Finally, brebo provides services to most automakers.
For example, the brebo brakes are equipped with light vehicles made by Fiat, Ford, Mercedes, Mitsubishi, Nissan, Renault, Volkswagen and Volvo.
In the passenger car sector, this list is endless and it may be easier to list manufacturers that are not brebo customers.
The main ones using brebo are Alpha Romeo, Aston Martin, Audi, Bentley, BMW, Buick, Cadillac, Chevrolet, Chrysler, Citroen, Corvette, Dodge, Ferrari, Fiat Honda, hyundai, Jaguar, Lamborghini, Land Rover, Lexus, Maserati, Mazda, Mercedes, Mini, Mitsubishi, Nissan, Opel, Pagani, Peugeot, Volkswagen and Porsche (full list here).
Most automakers not only do business with brebo, but most of these relationships are long-term, highly collaborative.
There is extensive interaction in research, development and testing.
These companies started using brebo products decades ago.
It is not easy for a new entrant to change these relationships.
Even in the racing industry, brebo has established a long-term partnership with customers.
The picture below shows that only McLaren left brebo for another supplier.
Ferrari has been working with brebo for more than 40 years.
New entrants such as Toro Rosso, BMW Sauber, Honda and Brown chose brebo 10 years ago and have not left since.
You can find a list of all F1 suppliers here.
Brebo and AP Racing (a Brembo brand)
75% of the F1 fleet is supplied, while the remaining three suppliers share the remaining four.
In terms of brake discs and pads, the brebo and AP cars supply seven teams.
For Italian companies like brebo, the main risk for RisksA is the referendum on December 4.
CNBC classified this as a greater risk than Donald Trump.
Many analysts have warned that the outcome of the Italian referendum could have a global impact.
The failure of the Italian referendum could lead to social unrest in other countries, which already face strong resistance to change and elections across Europe will take place next year.
As a result, Italy and the international stock market may be under pressure.
In this case, if the changes proposed by the Italian government are rejected, the market will be turbulent and the share price of brebo will fall.
However, this will be an opportunity to buy their shares at attractive prices.
Another risk is the cyclical nature of the automotive industry.
The brakes for passenger cars are 74.
Sales in 2015 were 6%, while sales of motorcycles and commercial vehicles were about 10%.
Many analysts expect car sales to peak, which could reduce brebo\'s market potential.
However, as the search for Alpha contributor correctly reported, the market segments operated by brebo are not the same as the cyclical nature of the entire automotive industry.
Brebo produces brakes with high quality and relatively high price.
Consumers who want to buy this product, such as Ferrari (NYSE:RACE)
The owner is quite flexible and price flexible.
The company currently offers 1.
The dividend yield of 9% is not special, but it is an interesting bonus given its past growth and future potential.
The current transaction amount for Brebo is € 53. 15 (
Also listed in the United States. S.
Symbol BRBOF for $61. 6).
This is a multiple of 15.
Analysts expected 3 euros to 2016 euros. 48 EPS.
So the company is not undervalued by historical standards.
Samsung\'s recent acquisition of Harman International Industrial provides more comparative data.
Samsung offered $112/share, with Haman valued at $ 8B. This is a 22.
4 times of 2016 EPS, or 9. 33 2016 EBITDA.
Haman\'s profit margin and growth trajectory are similar to that of brebo.
It may seem to be more tech focused and should therefore get a higher multiple, but given the high multiple of brebo
In terms of end products, R & D expenditures and brands, brebo should at least get the same multiple.
If brebo is valued with a similar indicator, its share price will be between 49 euros. 7 and €78.
Assuming EPS grew by 4% and WACC grew by 10%, my own valuation model valued the company at 54 euros. 2.
So, according to the current share price, brebo is not a deal, but the recent weakness and the Italian referendum may provide some opportunities.
Shares have lost some base over the past few weeks, falling from 57 euros to the current 53 euros.
There may be some weaknesses that will persist in the Italian referendum, and I will try to start a 50% position at a price of 50 euros. 5.
The rest of the positions should be obtained after the referendum (4th December).
If the proposed changes do not pass, I expect the share price to drop to around 46 euros, which should be the second entry point.
Brebo is a company with growing revenue and profitability and strong balance sheets.
The company is in the leading position in the high-end market.
End breaking system for cars and motorcycles.
Its R & D capabilities, coupled with long-term relationships with manufacturing companies, provide a sustainable competitive advantage.
The company is reasonably priced, but the upcoming Italian referendum may provide some interesting entry points.
Brebo is an iconic company that will thrive in many years to come.
As always, thank you for reading.
If you want to keep an eye on my future article, just click the \"follow\" button next to my name at the top.
I would also like to know what you think about brebo.
Finally, if you would like me to introduce a specific company, please let me know in the comments.
Thank you for reading!
Disclosure: I/we don\'t have a position in any of the stocks mentioned, but may start a long position in BRBOF within the next 72 hours.
This article was written by myself and expressed my views.
I received no compensation (
In addition to Seeking Alpha).
I have no business relationship with any stock company mentioned in this article.
Additional disclosure: Please note that brebo can also be acquired in the Italian stock market, where liquidity has increased significantly.
This symbol is BRE.
Editor\'s note: This article discusses one or more securities that are not traded on major US securitiesS. exchange.
Please note the risks associated with these stocks.
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