Yesterday’s Interim Results announcement from CT Automotive Group (LON:CTA) for the six months to end-June saw sales revenues down from $68.2m to $60.5m, however its adjusted pre-tax profits were up convincingly at $4.1m ($2.5m), showing an almost doubled margin of 6.7% (3.7%).
The company’s earnings more than doubled to 4.7c (1.7c) per share, while the group reduced its net debt by over a third to just $5.8m ($9.0m).
The balance of the year is now expected to show further advances.
CEO Simon Phillips stated that:
"Our focus on delivering margin improvement continues to come through with profit before tax on track to be in line with market expectations for the full year and the profit before tax margin slightly ahead.
For the first-half, gross profit margin improved by 250bps to 28.7%, compared to H1 23, reflecting successful cost reduction initiatives.
As a result, the Company has delivered an Adj. PBT of $4.1million, a substantial improvement of 59% on the prior year.
Existing customer volumes have aligned back to current demand as expected.
However, five key contract wins from existing customers in H1 24, worth an estimated $27.5m annually have boosted our order book through to 2027, which with further prospects leave the business well placed to grow revenue by taking market share."
The Business
Based in Portsmouth, but operating globally, the £46m capitalised CT Automotive Group designs, develops and manufactures automotive parts for the most well-known automotive brands on the planet.
The company provides interior finishes, such as dashboard panels and fascia finishes, and kinematic assemblies, such as air registers, arm rests, deployable cup holders and storage systems, as well as their associated tooling, for automotive original equipment suppliers (OEMs) and global Tier One manufacturers.
Its tailoring and trim department caters for and provides wrapped trim panels, shifter assemblies and lid consoles.
It specialises in 2k tooling manufacture and production supply of cabin comfort system components, including a broad range of heating, ventilation, and air conditioning (HVAC) doors and assemblies.
These critical components are managed through an intricate global network of reactive supply chains to arrive JIT (Just in Time) at their respective OEM manufacturing plants.
Over the last couple of decades, it has expanded substantially and is now one of the leading names in the industry, while it plans to keep growing through the implementation of innovative ideas.
The group, which already has sites in the UK, the US, China, Japan, Hong Kong, Turkey, Germany, France, Spain, India, Czech Republic, Mexico and Brazil.
The core manufacturing and design operations are based in Shenzhen and Ganzhou in China, through a Wholly Foreign-Owned Enterprise (‘WFOE’) where it is able to benefit from lower cost production processes, labour and plant hardware and has over 50 senior western trained specialist engineers.
It is continuing to look for new business locations to ensure that its global production and supply remains cost-effective and appropriate to demand.
Its list of OEM clients includes Audi, Bentley, Mazda, Renault, Jeep, Magna, Mitsubishi Motors, Lamborghini, Mercedes Benz, Kasai, Lucid, Infiniti, Honda, Faurecia, Ford, Chevrolet, Seat, Skoda, VW, Volvo, Peugeot, and Nissan.
The group currently supplies component part types to over 57 different models for 22 OEMs.
Since its formation, it has been one of the very few new entrants to the market, which is characterised by high barriers to entry.
The Equity
There are some 73.6m shares in issue.
The larger holders include Simon Phillips (26.77%), Otus Capital Management (17.86%), Premier Fund Managers (9.19%), Raymond James Financial (7.89%), Stonehage Fleming Investment Management (7.89%), Pitharn Ongkosit (3.67%), Lombard Odier Asset Management (3.23%), and Scott McKenzie (3.05%).
Analyst View
Caroline de La Soujeole at Singer Capital Markets rates the group’s shares as a Buy, with a 120p Price Objective.
Her estimates for the current year to end-December are for $119.1m ($143.0m) revenues, with adjusted pre-tax profits of $9.3m ($8.3m) and earnings of 10.1c (13.7c) per share.
For the 2025 year she goes for $136.8m sales, $12.3m profits and 13.4c in earnings.
She notes that the group’s shares have been weak in recent months (-18% 3 months view) reflecting investor nervousness about end-markets, however yesterday’s results show those concerns have been overdone.
In My View
On the basis of the broker’s analysis, it does look as though this group’s shares, which were 85p in January this year and are now just 56.5p, have been oversold.
What is more, with order books increasing, they are very capable of reacting positively to further good news.
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