J.P. 摩根-美股-科技软件行业-交换ALTR和ANSS的评级保持AZPN减持评级-2019.9.11-35页.pdf

North America Equity Research11 September 2019Equity Ratings and Price TargetsMkt CapRatingPrice TargetCompanyTicker($mn)Price($)CurPrevCurEnd DatePrevEnd DateAltairALTR US2,381.4432.42UWN34.00Dec-2042.00n/cANSYS,Inc.ANSS US18,198.58210.38NUW228.00Dec-20190.00n/cAspen TechnologyAZPN US9,370.69121.81UWn/c123.00Dec-20131.00n/cSource:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 10 Sep 19.Assuming Coverage of Simulation and Optimization SoftwareSwapping Ratings of ALTR and ANSS,Remain UW AZPNSoftware TechnologyJackson E Ader,CFA AC(1-212)622-Bloomberg JPMA ADER J.P.Morgan Securities LLCSterling Auty,CFA(1-212)622-J.P.Morgan Securities LLCMatthew Parron(1-212)622-J.P.Morgan Securities LLCSahil Sharma(1-212)622-J.P.Morgan India Private LimitedSee page 30 for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.We are assuming coverage of the simulation and optimization software market today,concurrent with our assumption of the Electronic Design Automation(EDA)subsector as well.We are switching our ratings on ANSS and ALTR,upgrading ANSS to Neutral while downgrading ALTR to Underweight,and remain Underweight on AZPN.These are cyclical names within our Software Technology coverage universe,and results from the stocks across the sub-sector have been spotty coinciding with a continuing degradation in end-market dataour view entering the year to reduce cyclical exposure is playing out,and we still believe it is the play as we enter the last quarter of the year.Downgrading Altair as European manufacturing poses a risk.We are downgrading ALTR to Underweight from Neutral and also lowering our price target to$34.Altair has a high exposure to the automotive sector and cited manufacturing end-market headwinds as part of the reason for its lowered revenue guidance for the year.Eurozone manufacturing PMI data has been below 50 since January,and ADSK delivered another negative read-through when it guided its second half revenue down,also citing European manufacturing as part of the slowdown.High expectations at AZPN tilt things more toward risk than reward.We remain Underweight shares of AZPN due to valuation and a slowdown in the outlook for energy capex.The new APM suite has delivered impressive results since being launched in 2016,and we expect the strong demand and execution to continue.However,assuming an 82%CAGR in the small,but growing,APM suite and cash flow growth acceleration into the high teens within the next three years yields a price target in-line with where shares trade today.Upgrading ANSS and raising our price target to$228.We see Ansys as the most defensive name in this cyclical sub-sector with its industry diversity and a 40%+margin profile providing flexibility in a down market.Shares are currently trading at 35x 2020E free cash flow,well beyond the industry average of 22x over the last 10 years,but we believe there are enough tailwinds to keep pace with the rest of our coverage.Our price target is based on our 10-year DCF and FCFF per share analysis.2North America Equity Research11 September 2019Jackson E Ader,CFA(1-212)622-Table of ContentsDowngrading Altair on End-Market Exposure.3High Hopes for Aspens APM Suite.4Upgrading Ansys as the more defensible stock in a cyclical segment.5Valuations remain elevated across the space despite less-predictable revenue streams.630 x is the new 20 x.6Revenue streams are lumpier today thanks to ASC 606.7ANSS and ALTRs Simulation Market Overview.10Pre-and post-processing is Altairs strength.10Solvers,the meat of the process and the market.11Simulation-driven design competition beginning to heat up.11TAM estimated at$6B.12AZPN:Optimizing Energy,Chemicals,and Process Manufacturing.13Core Suites of Engineering&Construction and Supply Chain producing strong growth.13Asset Performance Management is still small but in hyper-growth mode.14Industry capex and rig counts are measures to monitor,but not perfect.15TAM expansion to$5B due to APM expansion.16Altair.18ANSYS,Inc.23Aspen Technology.273North America Equity Research11 September 2019Jackson E Ader,CFA(1-212)622-Downgrading Altair on End-Market ExposureWe are downgrading Altair to Underweight from Neutral.The exposure to the automotive industry,coupled with the relatively thin cash flow margin compared to others in the space,makes it less defensible in the event of a rollover in customer demand.The three key reasons for our downgrade are below.European manufacturing expected to weigh on growthThe company lowered its revenue outlook for the second half of the year due to headwinds stemming from international manufacturing customers,FX,and some license model shifting from the recently acquired Datawatch.Clearly,the biggest concern we have is around the manufacturing headwinds.We believe that Altair still generates roughly half of its simulation software revenue from the automotive industry with a big portion of that coming from the European automakers.This is why Autodesks second half guide-down to the tune of$100M was a bleak read-through for Altair as Autodesk also cited European manufacturing weakness as a principal contributor.Eurozone PMI has fallen consistently through 2019 with readings below 50 in each of the last seven months.Margin profile means shorter leash for investmentsAltair is growing its software revenue base faster than that of ANSS,but we believe the margin profile at Altair does not lend itself to be able to continue to step on the investment gas pedal through a downturn.We still expect margins to expand in 2019 by 170 bps compared to 2018,but Datawatch synergies and the move to 606 contribute to a portion of this,so we do not believe it is entirely organic.Also,after the most recent guidance management noted that it would continue to invest in sales people and technical resources while remaining prudent on spending in other areas.We believe maintaining investment levels is the right approach,but with cash flow margins forecast in the mid-single digits,the flexibility may not be there.Cash flow valuation far beyond peersValuation across the board is a concern of ours in the engineering software industry,but on a free cash flow basis ALTRs valuation stands out.Shares are currently trading at 50 x our revised 2020 FCF estimates,which is well ahead of the industry average and,in our opinion,well ahead of what the growth warrants.We recognize that ALTR is not at the mature margin profile of the rest of the space,but this is also not a young companyit was founded over 30 years agoso we would look for better cash flow expansion as we move ahead.4North America Equity Research11 September 2019Jackson E Ader,CFA(1-212)622-High Hopes for Aspens APM SuiteWhile we are reiterating our Underweight rating of Aspen,we are updating our overall investment thesis.The issues of debate at the moment are the expectations of the APM suite and whether it can deliver on those expectations,the end-market volatility,and current valuation.More detail is below.APM provides additive growth,but expectations are very highAspens new asset performance management(APM)suite has garnered a lot of attention since its launch in 2016.Where the traditional E&C and MSC suites are aimed at optimizing the large capital assets of the companys customer base,APMs main value proposition is keeping those assets running.The suite generated$14M in annual customer spend in fiscal 2019,just 2.6%of the companys total,but expectations for contribution are strong.We estimate annual spend will more than double to$30.8M in fiscal 2020 and,in our opinion,give the company full execution credit in the out years with growth moderating only slightly to 60%in fiscal 2023.While APM is clearly in a secular adoption phase,we have seen peers like PTC struggle to balance the fine line of fueling an emerging segment while maintaining a more mature business as well,which puts high investor expectations at risk.Energy capex forecast moderating after big rebound in 2018Our energy and chemical sectors capital expenditure tracker showed a nice recovery in 2018 with the group of over 100 companies in those markets growing their capex 15.0%.This was essentially the snap-back year for capex after 2014-6 saw a reduction of over$250B from the peak of$596B in 2013.This growth is not expected to continue,however,with our tracker pointing to a moderate decline in capex budgets in 2019 followed by growth of just 1.5%in 2020 as the industry appears to have found a new level of spend with oil generally remaining in the$40-70 range over the last three years.Figure 1:End-market capex looks to be moderatingSource:Company reports,Bloomberg,and J.P.Morgan estimates.Valuation north of 30 x for a mid-to high-single-digit growerJust like the other names in the engineering software sector,Aspens valuation has gotten ahead of itself relative to historical norms.Shares are currently trading at 35x calendar 2019 free cash flow and 31.1x calendar 2020.Not only is this more than 50%above the companys average for the last decade,but cash flow is expected to grow 7.7%next year as margins are taken down to fuel the APM growth.5North America Equity Research11 September 2019Jackson E Ader,CFA(1-212)622-Upgrading Ansys as the more defensible stock in a cyclical segmentWe are upgrading shares of Ansys to Neutral from Underweight as we see the risk-reward profile more balanced.This stock is by no means cheap relative to its historical trading multiples at nearly double its average FCF multiple from 2009-14,but we believe its best-in-class margins,diverse markets,and mega-deal upside potential help shares keep pace with our coverage universe.Margins in the mid 40%s mean the company can invest through any cycleAnsys has some of the best margins in our coverage universe and has for quite some time,boasting 40%+non-GAAP operating margins each year going back to 2007,and a couple years margins were above 50%.What this means is that even if the macro environment rolls over Ansys will be able to maintain investments while others may be forced to retrench.Looking at the companys performance through the recession of 2008 and 2009,management was able to weather the storm nicely,expanding margins in 2008,2009,and 2010,while being able to acquire Ansoft,an EDA vendor,in 2008.We like that margins at this level give the company options and flexibility in the event of a downturn.Broad industry diversification stabilizes top-line growthAnsys has a broad product offering across every major use-case as well as a diverse set of customers in different industries.Its largest end-market exposure is to high tech at 34%,but this is split between electronics companies and semiconductor companies,neither of which we believe makes up more than 20%of revenue.Aero,auto,and industrial equipment companies make up the next largest segments at 17%,18%,and 10%,respectively,in the most recent quarter.So while Aspen(energy)and Altair(automotive)have large exposures to a single sector,ANSSs diversification makes it more attractive.Megadeal pipeline has the potential for large quarterly upsideThe company has the potential to sign very large deals in any given quarter,which provides massive amounts of upside to revenue and EPS estimates.We believe the company does a savvy job in guiding the Street such that the large deal pipeline influences longer term outlooks but the quarterly numbers are not dependent on these large deals closing.Further,the company does not push their customers to sign lease or perpetual deals one way or the other,so large deals could be recognized completely in the period for a perpetual license agreement,and now under ASC 606 even a multi-year lease deal sees the biggest chunk of the revenue recognized upfront.We do not need to go back too far to see this play out;last quarter the company produced$37.2M of upside to revenue relative to our estimates,thanks in part to a$49M deal signed in the quarter.Valuation above historical levelsWhile we are upgrading from Underweight we are still not optimistic about the performance relative to some of the secular growers in our coverage,and the stock is trading well beyond its historical EV/FCFF multiple range,which keeps us Neutral.6North America Equity Research11 September 2019Jackson E Ader,CFA(1-212)622-Valuations remain elevated across the space despite less-predictable revenue streamsValuations across all of software have steeply increased in the last couple years as we have documented with our historical valuation check-in notes(here,here and here).The engineering sub-segment of the software world is a more mature market than many of the other sub-segments like cyber security or systems management or communication where new entrants,disruption,and hyper-growth are commonplace.However,engineering software has not been immune to the valuation creep with the average forward free cash flow multiple being 31x for the past six months compared to an average of 22.4x in the last decade.Below,Figure 2 is a line chart of all the forward FCF multiples in the comparison group.We note that we have excluded ALTR from the below graphs and excluded any reading above 45x to attempt to standardize the multiples actually being used by investors for valuation.This latter exclusion mostly applies to ADSK as it went through the heart of its subscription transition.Figure 2:Forward multiples have consistently risen over the last decadeSource:Company reports and Bloomberg30 x is the new 20 xWhile the average forward multiple for the entire 10-year series is 22.4x,we believe a split between the first five years and the last five years gives us a better sense of where we are relative to history.In the period between September 2009 and September 2014 the average forward multiple was 15.2x,and in the subsequent fiveyears,from September 2014 to today,the average is 10.0 x higher.During the first five years of the time series,exactly one stock hit a forward multiple of 30 x,once.In fact,it was not until the ADSK and PTC subscription transitions got underway that we started to see 30 x multiples with any regularity,with these multiples being aided by the move to lower initial cash flow collections and annual billing.Prior to 2016 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