Halla Visteon Climate Control (018880)

Transcription

1 Halla Visteon Climate Control (1888) Hold (Reinstate) Stock price (Mar 31, KRW) 48,6 Market cap (USD mn) 4,873 Shares outstanding (mn) 17 52W High/Low (KRW) 48,6/27,2 6M avg. daily turnover (USD mn) 6.8 Free float (%) 3. Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/EBITDA PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) (YoY) (W bn) (x) (x) (x) (%) 212A 3, , A 5, , F 5, , F 6, , Foreign ownership (%) F 6, , Note: NP and EPS attributed to controlling interest Smart choice of a major technology, but high price Performance 1M 6M 12M Absolute (%) Rel. to Kospi (%p) Reinstate coverage with Hold: We reinstate coverage of Halla Visteon Climate Control (HVCC) with Hold. If we apply the global auto parts average 15x 12MF PE, the fair value arrives at W47,7. Despite possible earnings growth on the merger, there is limited upside from the current share price (15.8x 214F PE). 12MF PE trend (X) 12MF PER (LHS) (KRW) 16. price (RHS) Apr-9 Apr-1 Apr-11 Apr-12 Apr-13 6, 5, 4, 3, 2, 1, Material merger synergies: After achieving outstanding top-line growth via M&A in 213, HVCC should see profitability growth stemming from merger synergies in 214. HVCC took over Visteon s subsidiaries (18 subsidiaries in January and three Chinese subsidiaries in March) for a total of W439.2bn in 213. With the acquisitions, HVCC s sales jumped 42% YoY but OPM dipped 1.5%p YoY to 7% in 213. Europe-based merged entities should regain 214F OPM of 1.5% (vs. 6.5% in 212 and.2% in 213) on economies of scale and cost cuts that will work to lift HVCC s consolidated profitability. De facto global company: HVCC is listed on the Korean stock market but is a de facto global company with four overseas nationals out of seven registered executives, two-thirds of sales coming from abroad and domestic shareholders accounting for just 1% of the total. As such, we believe HVCC must be excluded from the so-called Korea discount. HVCC is resilient to FX changes with 35 production bases worldwide. The four-year average dividend payout of 31.1% and yield of 3% exceed the respective Kospi averages of 16.7% and 1.4%. Limited upside and small free float: HVCC trades at 15.8x 214F PE, double the level seen in early-213. We believe potential merger synergies and its premium as a global play are sufficiently priced in at the current level. HVCC is 7% owned by Visteon and 5.9% by the National Pension Service, the secondlargest shareholder. Thus, its free-float shares stand at a mere 24.1% and create a discount factor. Jin Woo Kim, CFA jinwoo.kim@truefriend.com Sung Moon Suh sungmoon.suh@truefriend.com Won Joon Choi wonjoon.choi@truefriend.com Risk further upside on sustainable PE premium justified by the climate control technology and Tesla vendor potential: Further share price upside is achievable if a higher-than-expected PE premium is given on the importance being recognized of climate control systems and growth potential as a Tesla vendor. In the past, the climate control was classified as a convenience but is now recognized as parts that determine a vehicle s performance in response to an ever-growing emphasis on fuel economy. EV manufacturers such as Tesla place a renewed stress on the climate control technology as the vehicles heating/air conditioning systems are not driven by the engine but are under separate control. 19

2 Figure 26. PE band Figure 27. PB band 5, (KRW) 5, (KRW) 45, 4, 35, 3, 14x 12x 1x 45, 4, 35, 3, 2.8x 2.4x 2.x 25, 8x 25, 1.6x 2, 15, 1, 6x 2, 15, 1, 1.2x.8x 5, 5, Figure 28. Sales breakdown by product (213) Figure 29. Sales breakdown by customer Fluid transport 1% 1 8 (%) Compressors 21% HVAC 42% 6 Ford Powertrain cooling 27% 2 HMG Source: Company data, Korea Investment & Securities Figure 3. Sales breakdown by region (213) Figure 31. OP breakdown by region (213) 9% Korea 34% Europe 2% 15% Korea 33% Europe 29% North America 9% North America 13% China 15% China 41% 2

3 Figure 32. How climate control systems work Engine compartment Compressor Condenser Expansion valve Evaporator High pressure/ high temp High pressure/ low temp Low pressure/ low temp Gas Liquid Liquid Compresses refrigerant gas using high pressure Condenses compressed refrigerant gas to liquid by cooling Drops pressure of liquid-state refrigerant Evaporates refrigerant and emits cool air Source: Company data, Denso, Korea Investment & Securities Figure production bases and four R&D centers globally Source: Company data, Korea Investment & Securities Figure 34. Global HVAC market share (212) Figure 35. Domestic HVAC market share (213) 8% 25% Denso 24% Kdac 17% Sanden 5% HVCC 13% HVCC 5% Calsonic 5% Delphi 7% Behr 8% Valeo 13% HCC 9.1% + Visteon 4% Doowon Climate Control 25% Source: IHS, Company data, Korea Investment & Securities 21

4 Figure 36. Ownership structure Figure 37. Shareholders by investor type (213) 24% Pension Fund 2% 3% NPS 6% Investment Advisor 45% Hedge Fund Manager 5% Visteon 7% Source: Bloomberg, Korea Investment & Securities Figure 38. Ford sales volume Figure 39. Dividend payout and yield: Kospi vs. HVCC (' units) 8, 7, 6, 5 4 (%) KOSPI dividend payout ratio (L) HVCC dividend payout ratio (L) KOSPI dividend yield (R) HVCC dividend yield (R) (%) 6 5 5, 3 4 4, 3 3, 2 2 2, 1, Source: Automotive News, Korea Investment & Securities Source: QuantWise, Korea Investment & Securities Table 9. Quarterly earnings (W bn) 1Q13 2Q13 3Q13 4Q13 1Q14F 2Q14F 3Q14 4Q14F F 215F 216F Sales 1,236 1,458 1,141 1,354 1,348 1,573 1,236 1,461 5,189 5,618 6,12 6,86 OP OPM 6.3% 7.% 6.5% 8.1% 7.5% 8.% 6.8% 7.9% 7.% 7.6% 7.8% 8.2% EBT NP Sales (% YoY) 42% 8% 9% 11% OP (% YoY) 17% 17% 12% 17% NP (% YoY) 27% 11% 11% 17% 22

5 Balance sheet FY-ending Dec. (W bn) 212A 213A 214F 215F 216F Current assets 1,373 1,75 1,846 2,1 2,236 Cash & cash equivalents Accounts & other receivables ,85 1,27 Inventory Non-current assets 863 1,249 1,527 1,79 1,971 Investment assets Tangible assets ,225 1,38 1,65 Intangible assets Total assets 2,236 2,954 3,373 3,72 4,27 Current liabilities 733 1,34 1,184 1,272 1,43 Accounts & other payables ,13 1,13 1,227 ST debt & bonds Current portion of LT debt Non-current liabilities Debentures LT debt & financial liabilities Total liabilities 798 1,413 1,644 1,766 1,962 Controlling interest 1,397 1,494 1,667 1,876 2,147 Capital stock Capital surplus 47 (23) (23) (23) (23) Capital adjustments Retained earnings 1,329 1,542 1,766 2,26 2,349 Minority interest Shareholders' equity 1,439 1,541 1,728 1,954 2,245 Income statement FY-ending Dec. (W bn) 212A 213A 214F 215F 216F Sales 3,653 5,189 5,618 6,12 6,86 COGS 3,67 4,326 4,719 5,128 5,73 Gross profit ,13 SG&A expenses Operating profit Financial income Interest income Financial expenses Interest expenses Other non-operating profit Gains (Losses) in associates, subsidiaries and JV Earnings before tax Income taxes Net profit Net profit of controlling interest Other comprehensive profit (14) (54) (54) (54) (54) Total comprehensive profit Total comprehensive profit of controlling interest EBITDA Cash flow FY-ending Dec. (W bn) 212A 213A 214F 215F 216F C/F from operations Net profit Depreciation Amortization Net incr. in W/C (119) (35) (14) (45) (22) 39 (21) C/F from investing (128) (554) (532) (476) (59) Capex (134) (193) (476) (417) (523) Decr. in fixed assets Incr. in investment (36) (46) (46) (47) Net incr. in intangible assets (1) (2) (15) (17) (23) (328) (1) (2) C/F from financing (79) 11 3 (99) (12) Incr. in equity Incr. in debt (4) Dividends (75) (77) (14) (14) (14) (35) (17) (19) (22) C/F from others (17) (2) Increase in cash 54 (54) Key financial data FY-ending Dec. 212A 213A 214F 215F 216F Per-share data (KRW) EPS 2,169 2,776 3,69 3,45 3,989 BPS 13,82 13,995 15,614 17,569 2,19 DPS Growth (%) Sales growth OP growth NP growth EPS growth EBITDA growth Profitability (%) OP margin NP margin EBITDA margin ROA ROE Dividend yield Stability Net debt (W bn) (343) (45) Debt/equity ratio (%) Valuation (x) PE PB PS EV/EBITDA Note: K-IFRS (consolidated) 23

6 Guide to Korea Investment & Securities Co., Ltd. stock ratings based on absolute 12-month forward share price performance BUY: Expected to give a return of +15% or more Hold: Expected to give a return between -15% and +15% Underweight: Expected to give a return of -15% or less Korea Investment & Securities does not offer target prices for stocks with Hold or Underweight ratings. Guide to Korea Investment & Securities Co., Ltd. sector ratings for the next 12 months Overweight: Recommend increasing the sector s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization. Neutral: Recommend maintaining the sector s weighting in the portfolio in line with its respective weighting in the Kospi (Kosdaq) based on market capitalization. Underweight: Recommend reducing the sector s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization. Analyst Certification I/We, as the research analyst/analysts who prepared this report, do hereby certify that the views expressed in this research report accurately reflect my/our personal views about the subject securities and issuers discussed in this report. I/We do hereby also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Important Disclosures As of the end of the month immediately preceding the date of publication of the research report or the public appearance (or the end of the second most recent month if the publication date is less than 1 calendar days after the end of the most recent month), Korea Investment & Securities Co., Ltd., or its affiliates does not own 1% or more of any class of common equity securities of the companies mentioned in this report. There is no actual, material conflict of interest of the research analyst or Korea Investment & Securities Co., Ltd., or its affiliates known at the time of publication of the research report or at the time of the public appearance. Korea Investment & Securities Co., Ltd., or its affiliates has not managed or co-managed a public offering of securities for the companies mentioned in this report in the past 12 months; Korea Investment & Securities Co., Ltd., or its affiliates has not received compensation for investment banking services from the companies mentioned in this report in the past 12 months; Korea Investment & Securities Co., Ltd., or its affiliates does not expect to receive or intend to seek compensation for investment banking services from the companies mentioned in this report in the next 3 months. Korea Investment & Securities Co., Ltd., or its affiliates was not making a market in securities of the companies mentioned in this report at the time that the research report was published. Korea Investment & Securities Co., Ltd. does not own over 1% of Hyundai Wia, Halla Visteon Climate Control, Pyeong Hwa Auto, Mando, S&T Motiv shares as of April 2, 214. Korea Investment & Securities Co., Ltd. has not provided this report to various third parties. Neither the analyst/analysts who prepared this report nor their associates own any shares of the company/companies covered in this report as of April 2, 214. Korea Investment & Securities Co., Ltd. has issued ELW with underlying stocks of Hyundai Wia, Mando and is the liquidity provider. Prepared by: Jinwoo Kim This report was written by Korea Investment & Securities Co., Ltd. to help its clients invest in securities. This material is copyrighted and may not be copied, redistributed, forwarded or altered in any way without the consent of Korea Investment & Securities Co., Ltd. This report has been prepared by Korea Investment & Securities Co., Ltd. and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. We make no representation as to its accuracy or completeness and it should not be relied upon as such. The company accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The final investment decision is based on the client s judgment, and this report cannot be used as evidence in any legal dispute related to investment decisions.