30.01.2025
Before the end of April this year, we should be able to see the Final Results for the year to end-December 2024 for CT Automotive (LON:CTA) – they will not look too clever, even so its shares could well show a gain in price from last night’s close of 33.5p.
The Business
This Portsmouth-based group is engaged in the design, development and manufacture of bespoke automotive interior finishes, such as dashboard panels and fascia finishes, as well as kinematic assemblies like air registers, arm rests, deployable cup holders and storage systems.
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 doors and assemblies.
The group also has a low-cost manufacturing footprint, with key production facilities located in Shenzhen and Ganzhou, China being complemented by additional manufacturing facilities in Mexico, Türkiye and Czechia.
Its global customers are some of the world's leading automotive original equipment suppliers and global Tier One manufacturers.
CT Automotive's operating model enables it to pursue a price leadership strategy, supplying high-quality parts to customers at a lower overall landed cost than its competitors.
This strategy has helped the group build a high-quality portfolio of OEM customers, both directly and via Tier One suppliers including Forvia and Marelli.
The group’s end customers include volume manufacturers, such as Nissan, Ford, GM and Volkswagen Audi Group, and premium luxury car brands such as Bentley and Lamborghini.
In addition, the business supplies all its customer base with a range of products for Plug-in Hybrid Electric Vehicle and Battery Electric Vehicle platforms and supplies electric car manufacturers, including Rivian and a US-based major EV OEM.
It currently supplies component part types to over 57 different models for some 22 OEMs.
Since its formation, the Group has been one of the very few new entrants to the market, which is characterised by high barriers to entry.
Yesterday’s Trading Update
Q4 2024 saw major OEMs seeking to destock, driven by higher interest rates and concerns over government-set EV quotas.
The group took measures to offset the impact of these wider market headwinds to some extent through: margin efficiency programmes implemented across all operational sites; the group's agnostic position between internal combustion engine and electric vehicles; and a continuing drive across the business to secure further significant operational efficiencies through automation and digitalisation initiatives, with a specific focus on AI.
Despite a challenging final quarter of the year for the automotive industry, the company yesterday guided the market that it expects to deliver a highly resilient performance for 2024, with revenue of no less than $117m, and with an adjusted pre-tax profit of no less than $8.6m, which would be broadly in line with market expectations.
Due to strong cash management, the group’s net debt as at 31st December 2024 was guided to have been slightly better than expected at $7.5m.
Management Comment
CEO Simon Phillips stated that:
"Despite challenging times where the industry has seen reduced volumes, CT Automotive has leveraged AI, digitisation, and automation to maintain strong profitability.
Historically, CT Automotive has achieved substantial year-on-year CAGR growth. After completing large-scale digitisation and automation, our focus has now shifted back to increasing top-line revenue.
We have expanded our sales function significantly, adopting a far more targeted and strategic approach, leveraging both existing and new customer bases.
This is part of our aggressive strategy to win new business and increase platform content across models.
In today's market, where legacy automakers face significant profitability challenges, CT Automotive's low-cost model positions us perfectly to capture increased market share during this period of industry transformation.
Our forward plan ensures that fixed costs remain stable while increased sales directly enhance gross profit, pushing profitability to the bottom line."
The Equity
There are some 73,597,548 shares in issue.
The larger holders include HSBC Private Bank Suisse (26.79%), Otus Capital Management (17.86%), LGT Capital Partners (13.27%), Premier Fund Managers (9.18%), Raymond James Financial (7.89%), Stonehage Fleming Investment Management (7.898%), Pitharn Ongkosit (3.67%), Janus Henderson Investors (3.64%), Lombard Odier Asset Management (3.23%), and HSBC Private Bank UK (1.84%).
Broker’s View
Analysts Caroline de La Soujeole and Carl Diebitsch, at Singer Capital Markets, have a Buy rating on the group’s shares, with a Price Objective of 100p.
Their estimates for the yar to end-December 2024 are for $117.0m ($143.0m) in revenues, while looking for $8.6m ($8.3m) of adjusted pre-tax profits, generating 9.4c (13.7c) of earnings per share.
For the current 2025 year they go for $126.0m sales, $10.5m profits, and earnings per share of 11.4c.
They take the view that with significant investment in its sales force and a company culture highly focused on innovation and driving operational efficiencies, CTA is well placed to take share and drive profitable growth.
My View
At just 33.5p I believe that the shares of CT Automotive could easily double in price and still hold strong attractions.
Between now and the end of April, when it publishes its Final Results, I would expect to see the group’s shares creeping ever higher.
I initiate my Master Investor coverage of this group by setting an easy 42p Target Price, which may only take a couple of months to see achievement.
(Profile 30.01.2025 @ 33.5p set a Target Price of 42p)
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