瑞信-美股-汽车与汽车零部件行业-美国汽车与汽车零部件行业研究：两个时钟的挑战-2019.6.26-99页 (2).pdf

U.S.Autos&Auto Parts Initiation The Challenge of the Two ClocksThe Challenge of the Two Clocks DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse 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.26 June 2019 Research Analyst Research Associate Dan Levy Tel:+(212)325-4617 dan.levycredit- Robert Moon Tel:+(212)325-7112 robert.mooncredit- Equity Research Americas 2 Dan Levy|212-325-4617|dan.levycredit- Table of Contents 3 Executive Summary/Stock Calls/Comp Table 7 The Challenge of the Two Clocks 13 The Challenge of the“Near”:Cycle Risks to the Downside 37 The Challenge of the“Far”:Electric Vehicles 49 The Challenge of the“Far”:Autonomous Vehicles 64 Our Dilemma on Auto Stocks 74 Company Tear Sheets 88 Appendix All share prices and price-related data as at 24 June 2019 3 Executive Summary The auto industrys challenge is concurrently balancing two clocks the near and the far.Simultaneously balancing cyclical with secular is not easy,requiring different skillsets and resource allocations.This will be THE challenge for the industry over the next several years:The challenge of the near no-growth industry outlook,with volatility and risk to downside.Requires added focus to manage cycle risk.The challenge of the far Multi-decade disruptive secular shift ahead for the automotive industry in the push to vehicle electrification and autonomous driving,and we are barely in the first inning.Yet attention and resource allocation required now,to avoid the risk of becoming a dinosaur.Margin pressures indicate challenge of balancing the near and far.Our two clocks industry view implies continued challenges to auto stocks over the mid-term.Yet with sentiment on auto stocks currently deeply negative,we see near-term opportunity based on valuation and underlying fundamentals:Outperform:Ford(F),Aptiv(APTV),American Axle(AXL),BorgWarner,(BWA),Dana(DAN),General Motors(GM)Neutral:Adient(ADNT),Delphi(DLPH),Lear(LEA),Magna(MGA),Veoneer(VNE)Underperform:Tesla(TSLA)Dan Levy|212-325-4617|dan.levycredit- 4 Source:Credit Suisse estimates,FactSet Industry coverage summary Dan Levy|212-325-4617|dan.levycredit- TickerCompany NameCS RatingTarget PriceUpside/DownsideOne LinerFFord Motor CompanyOUTPERFORM$1331%Textbook case for the“Two Clocks.”Undergoing concurrent redesign of business profitability alongside longer term reimagining of business.Yet upside ahead for stock amid early signs of improvement,with more to come.GMGeneral Motors CompanyOUTPERFORM$4830%Right balance of the“Two Clocks.”One of the best names in our coverage balancing the near(healthy profit stream,improving FCF)with the far(near or at the front of AV pack,doubling down on EVs)offering a compelling narrative on both fronts.APTVAptiv PLCOUTPERFORM$9015%Exposure to the right products and trends give APTV one of the best growth outlooks in the space.This,combined with strong positioning in balancing the two clocks,drives our Outperform rating.AXLAmerican Axle&Manufacturing Holdings,Inc.OUTPERFORM$1528%Amid challenged valuation,AXL stock is attractive given a potential 2H19 inflection in datapoints(best earnings delta in our coverage),and also due to solid and highly underappreciated FCF generationDANDana IncorporatedOUTPERFORM$2223%Underappreciated strategy and narrative differentiated end market diversity,resilient business model,with solid contribution from M&A.BWABorgWarner Inc.OUTPERFORM$5020%One of the best growth profiles in our supplier coverage,with robust backlog supporting solid outgrowth vs.mkt.In spite of LT risk for EVs,oppty ahead for BWA,with hybrid serving as a growth driver,and offering arguably the most complete portfolio in EV components relative to other suppliers.DLPHDelphi Technologies PlcNEUTRAL$2117%Opportunity ahead for operational recovery,and long-term opportunity for growth given a robust order book.Yet we are Neutral on the stock given sluggish top-line in 2020 and as it will take time for operations to fully improve.LEALear CorporationNEUTRAL$15512%Narrative shifting amid the pivot from“Lear 1.0”to“Lear 2.0.”Increased focus on tech to improve multiple and drive growth amid challenged industry,yet risk ahead of margin compression.MGAMagna International Inc.NEUTRAL$5513%We see solid FCF generation ahead,which will help to support EPS growth in the face of what we see as limited EBIT growth.Yet given our outlook for modest top-line growth and that it may take time for the FCF story to drive a re-rating,we remain on the sidelines for the time being.ADNTAdient plcNEUTRAL$249%Stock has struggled amid operational missteps.We believe profits have troughed,with recovery ahead.Yet given long path to recovery with execution risks on top of cycle risks,we prefer to be on the sidelines.VNEVeoneer,Inc.NEUTRAL$184%Potential to be the best organic revenue growth story amongst parts suppliers,with robust order book driven by exposure to the high-growth active safety space.Yet with significant resources required to execute VNEs growth plan,EBIT breakeven not expected before 2023.TSLATesla IncUNDERPERFORM$189-15%Tesla is leading in areas that will define the future of carmaking,yet it nevertheless faces risks amid its growth path reflected in our below-consensus estimates.And despite growth ahead,Tesla is more likely to settle as a niche automaker5 Sources:Credit Suisse estimates,FactSet Note Ford and GM EV/EBTIDA valuation excludes finco net debt Industry coverage summary comp sheet Dan Levy|212-325-4617|dan.levycredit- U.S.Autos Comp SheetIn USD,except where noted otherwiseDivNameTickerRatingFY19E FY20E FY19E FY20EFY19EYieldFord Motor CompanyFO$10$1331%7.1x6.9x2.3x2.4x39,7706.9%1.7%6.0%General Motors CompanyGMO$37$4830%5.6x5.8x3.3x3.4x53,0750.2%8.8%4.1%Tesla IncTSLAU$224$189-15%na39.4x22.8x13.0 x38,687na0.2%0.0%OEMs Average(ex TSLA)30%6.3x6.3x2.8x2.9x3.5%5.3%5.1%OEMs Median(ex TSLA)30%6.3x6.3x2.8x2.9x3.5%5.3%5.1%Adient plcADNTN$22$249%13.9x6.9x6.7x5.7x2,058-4.5%-11.0%2.5%American Axle&Manufacturing Holdings,Inc.AXLO$12$1528%4.2x4.2x4.1x4.1x1,322-4.9%25.4%0.0%Aptiv PLCAPTVO$78$9015%15.6x13.7x10.5x9.6x20,3257.2%4.0%1.1%BorgWarner Inc.BWAO$42$5020%9.9x9.1x6.2x5.8x8,6365.0%6.6%1.6%Dana IncorporatedDANO$18$2223%5.4x5.1x4.4x4.2x2,5959.4%10.7%2.2%Delphi Technologies PlcDLPHN$18$2117%5.7x4.9x4.8x4.3x1,593-0.5%0.8%3.8%Lear CorporationLEAN$138$15512%7.9x7.0 x4.6x4.4x8,7176.8%10.5%2.1%Magna International Inc.MGAN$49$5513%7.8x7.0 x4.7x4.6x15,9366.2%11.0%2.9%Veoneer,Inc.VNEN$17$184%nananana1,510na-36.6%0.0%Suppliers Average(ex VNE)17%8.8x7.2x5.7x5.3x3.1%7.2%2.0%Suppliers Median(ex VNE)16%7.8x6.9x4.7x4.5x5.6%8.5%2.1%Last PriceMarket Cap(bn)P/E Target PriceEPS CAGR FY19-21EUpside/(Downside)EV/EBITDA FCF Yield 6 US Autos&Auto Parts Coverage Overview Links to our initiation reports Dan Levy|212-325-4617|dan.levycredit- Thematic deep dives:The Challenge of the Far:AVs The Challenge of the Far:EVs Outperform:F:The textbook case for the“Two Clocks”GM:The right balance of the Two Clocks APTV:Story of the shifting pies keeps growth robust AXL:Positive data point inflection,strong FCF story DAN:Solid Strategy at an Attractive Price BWA:Robust growth narrative,long-term opportunity in EV world Neutral:DLPH:The path and challenges to profitable growth LEA:Lear 1.0 vs.Lear 2.0 a pivoting narrative MGA:Free cash flow the key link in the diverse product strategy ADNT:Recovery ahead,but risks and long timing keep us on the sidelines VNE:Double-digit growth opportunity,but long path to profitability Underperform:TSLA:Tesla vs.VW the debate that will likely define Tesla for the next 10 years 7 The Challenge of the Two Clocks Dan Levy|212-325-4617|dan.levycredit- 8 Source:Credit Suisse Research Note the“clocks”concept was originally cited by Ford in its Oct2017 Strategic Update,as it cited three clocks “now”,“near”and“far”The Near The auto industrys challenge balancing two clocks Simultaneously balancing cyclical with secular is not easy,requiring different skillsets and resource allocations.This will be THE challenge for the industry over the next several years The Far The“near”represents the challenges of navigating through the auto industry cycle ensuring supply meets demand,and that the business is run in a healthy manner The“far”represents the multi-decade secular shift ahead for the auto industry the transition to electric vehicles and autonomous driving The challenges of this balancing act have magnified in the past year.Late cycle pressures and volatility have made the“near”a tougher environment.At the same time,with long-term disruption risks coming into greater focus,industry participants have no choice but to concurrently address the“far.”Dan Levy|212-325-4617|dan.levycredit- 91 92 93 94 95 96 97 98 99 100 101Jan-18Feb-18Mar-18Apr-18May-18Jun-18Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19Apr-19May-19Jun-19CY 2018CY 2019-2.7%Y/Y-1.0%Y/Y2.1%Y/Y1.9%Y/Ymn units9 Sources:IHS Automotive,Credit Suisse Research Cycle was helpful in the past,as strong profit generation could be used to fund future tech development costs Industry still healthy,operating at elevated levels However,2018 showed volatility of cycle,with negative revisions globally,coming from all key regions(North America,Europe,China)i.e.nearly a year ago 2019 global light vehicle production was forecast by IHS Automotive(a third-party data provider)to be up 2%y/y,but is now forecast to be down 1%Other macro pressures created added headwinds i.e.tariffs/trade,commodity prices these factors still serving as pressures For nearly all companies,these pressures drove margins down y/y in 2018 marking the first year post-crisis of margin decline Must be balanced with the challenge of the medium increasing content cost in vehicles to meet regulatory requirements over coming years No-growth outlook ahead,with volatility and risk to downside,meaning the challenge of the“near”will remain a focus The challenge of the near No-growth industry outlook,with volatility and risk to downside,requires added focus to manage cycle risk Global IHS Light Vehicle Production Estimates Source:IHS Automotive Source:Credit Suisse estimates,IHS Automotive Dan Levy|212-325-4617|dan.levycredit- CS Light Vehicle Production Estimates Light Vehicle Production000s Units20182019E2020E2021ENorth America16,95916,57216,26116,162Europe21,99321,28321,17821,330China26,85325,00225,01625,252Global94,18491,09491,00392,505Y/Y%Delta20182019E2020E2021ENorth America-0.6%-2.3%-1.9%-0.6%Europe-1.0%-3.2%-0.5%0.7%China-4.1%-6.9%0.1%0.9%Global-1.0%-3.3%-0.1%1.7%Credit Suisse Estimates10 Vehicle electrification and the push to autonomous driving are the two long-term megatrends of the automotive industry These will be multi-decade transitions,and we are barely in the first inning:In 2018 BEVs(battery electric vehicles)represented only 1.5%of light vehicles sold globally,and we expect it will take another 30 years for BEVs to account for the majority of global vehicle sales Vehicles with advanced driver assist/basic autopilot features only starting commercialization now,with more advanced forms of autonomy still in testing phase and very far off Yet strategic focus and allocation of resources required now,to avoid the risk of becoming a dinosaur:A myriad of challenges need to be addressed to enable uptake New competitors and modification of value chain create an added layer of risk Autonomous driving threatens to radically alter vehicle ownership and the automotive business model Significant portions of budgets to be devoted to development With the sound of disruption becoming louder as time progresses,attention and resource allocation toward this will only increase The challenge of the far Multi-decade disruptive secular shift ahead for the automotive industry.Yet attention and resource allocation are required now,to avoid the risk of becoming a dinosaur Dan Levy|212-325-4617|dan.levycredit- 11 Sources:Credit Suisse Hardline Retail Research E-commerce as a case study for the far Retailer margins pressured in early stages of e-commerce.Similarly,margins for automotive industry participants are likely to be pressured amid the radical shift to autonomous driving and electrification WSMHDLOWTSCOBBBYPIRDKSSPWHPRTYBBY-USCOSTJWNULTAAZOAAPORLYGroup Avg-25%-20%-15%-10%-5%0%5%10%0%10%20%30%40%50%60%EBIT Margin Trajectory:CAGR 14-17EE-Commerce Penetration(2017E)Margin Change vs.E-commerce PenetrationAbove the line margin growers;While online penetration is growing,store sales and market share gains remain healthy limiting the margin pressure to date.Below the line margin decliners;Online penetration is growing,in many cases cannibalizing in store sales,or investments are accelerating to catch up/keep up with faster growing competitors0.000.100.200.300.400.500.600.700.800.901.001234567891011121314Number of Years(that Margins are Declining from Recent Peak)BBYBBBYHIBBWSMDKSWMTTGTJWNTSCOORLY,AZOSPWHHardline Retail EBIT Hardline Retail EBIT Margin Investment Margin Investment Curve;Curve;Most retailers continue to follow similar trend down,as they grow online and grapple with other rising costs E-commerce serves as a case study on disruption retailer margins pressured in the early stages of e-commerce penetration given elevated investment cost,as well as the challenge of concurrently balancing brick-and-mortar retail with online The shift to emerging tech for auto companies is likely to bring margin pressures through at least the early stages of penetration:Elevated investment spend Potential cannibalization of current mature products/negative mix Modification of value chains Shift in business model Emergence of new competitors Dan Levy|212-325-4617|dan.levycredit- 6.4%7.2%7.2%7.3%7.4%8.2%8.8%9.0%8.3%7.6%8.1%6%7%8%9%10%201020112012201320142015201620172018 2019E 2020EU.S.Autos Adj.EBIT Marginmargins peaked in 201712 Note:AV=autonomous vehicle,EV=electric vehicle After a multi-year stretch of margin expansion coinciding with the improvement of the cycle,industry margins largely peaked in 2016/17.And in 2018 margins compressed for nearly all companies in our coverage(albeit with varied magnitude),driven by a weaker environment for auto sales/production,as well as headwinds from tariffs/commodities.While some will see improvement this year and next related to self-help(i.e.Ford,ADNT),generally more macro pressure/volatility+increased spend on secular=further risk of margin pressure Margin pressures indicate the challenge of balancing near and far U.S.Autos EBIT Margin Margins peaked in 2017 Note:U.S.Autos EBIT Margin-Credit Suisse Estimates for ADNT,APTV,AXL,BWA,DAN,DLPH,LEA,MGA,Ford,GM Consensus(FactSet)for ALV,