Presented by Nan Liang Tianbai Wang Qi He May 1, 2012
Agenda Intro Related Stock Market Macro Review Business Review Comps Financial Analysis DCF
Intro Business Description Gentex Corporation designs, develops, manufactures and markets proprietary electro-optic products, including automatic-dimming rearview mirrors for the automotive industry and fire protection products mainly for the commercial building industry. Sector: Consumer Goods Industry: Auto Parts & Equipment GICS Map: 251010 Revenue in 2011: 1. 02 Billion Resource: GNTX 10 -K
Products Resource: GNTX Official Website
Global Business Distribution Resource: GNTX Official Website
Intro Financial Description 52 Week Range: $20. 69 - $32. 21 PEG: 0. 95 Trailing P/E: 18. 78 Forward P/E: 15. 26 Implied 1 Year Growth Rate: 23% 5 -7 Growth Rate: 5. 14% Market Cap: 3. 15 B Beta: 1. 51 Resource: Yahoo Finance
Related Stock Market Resource: Yahoo Finance
Industry Global Automobile Auto Parts Manufacturing Mirror Manufacturing
Global Automobile Manufacturing & Auto Parts Manufacturing Global Auto Vehicle Sales Global Auto Parts Manufacturing Resource: IBIS World
Business Locations Resource: IBIS World
Automakers Resource: IBIS World
Industry Opportunity Economic Indicator – Consumer sentiment index Demand Growth Government Intervention Regulation & Tech Innovation Cheaper Currency & Competitiveness
Opportunity 1 – Better Economy When households are optimistic about their financial future and the economy, they are more likely to spend money on big-ticket items. Purchasing a new vehicle requires a significant outlay, which is often financed through loans. In times of economic downturns, households are less willing to spend money on expensive items, for fear of losing their jobs and being unable to meet repayments. Consumer sentiment has been fairly low around the globe in 2009 due to the global financial crisis. Resource: IBIS World
Opportunity 2 – Demand Growth Developed Economies • Mature industry with limited growth potential as the market is saturated • Aging population & Replacement of existing vehicles Emerging Economies • Rising wealth, standards of living and access to proper road infrastructure • Population (esp. young adults) growth
Opportunity 3 - Government Incentives During Recession q q q Vehicle Scrappage Programs (Cash Rebates) Cash for Clunkers Incentive Program Tax Rebates to Business Cash Rebates to Replace Old Vehicles Credit Markets & Tax Cut Governments created incentives to drive up car sales and keep jobs safe. Though interventions not be enough to keep global revenue positive.
Opportunity 4 – Regulation & Innovation KIDS TRANSPORTATION SAFETY ACT TIMELINE February 2008: KTSA signed into law, requiring all new vehicles in the U. S. to increase the field of view while backing up 2008 – 2009: National Highway Traffic Safety Administration (NHTSA) initiated rulemaking process December 7, 2010: NHTSA published initial rule, requiring the use of backup cameras and related displays
Market Risks Economic Activity Volatility Fuel & Steel Costs Pricing Pressures from Automotive Manufacturers Auto Parts
ESTIMATED AUTOMATIC-DIMMING MIRROR GLOBAL MARKET SHARE Resource: GNTX Presentation
Auto-Dimming Rearview Mirrors Market GNTX: Leading producer and the dominant supplier to the automotive industry: 88% market share worldwide in 2011, 85% in 2010. U. S. manufacturer Magna: hybrid or solid polymer matrix versions of electro chromic mirrors. 2 Japanese manufacturers: supply a few vehicle models in Japan with solid-state electro chromic mirrors. Some small Chinese domestic mirror suppliers: selling auto-dimming rearview mirrors, in low volume, within the domestic China automotive market but not currently meet global automotive grade specifications. Resource: GNTX 10 -K
Product Lines Found In 1974 Manufacturer Of These i. e. Boeing 787 Fire Protection Products Dimmable Aircraft Windows Auto. Dimming Rearview Mirrors 98% Of Total Sales Source: Gentex’s Website
Auto-dimming Mirrors Glare Source: Investor Presentation
Smart Beams ® Source: Investor Presentation
Rear Camera Display (RCD) Mirror Source: Investor Presentation
Revenue Growth Source: Annual Reports
Main Clients Source: Annual Reports
Region Source: Annual Reports
Global Market Share (2011) Main Competitor Magna Mirrors Source: Annual Reports
Competitor: Magna Mirrors + Owned by Magna International, Inc. (NYSE: MGA) + MGA also produces lots of auto parts for cars: Body, Seating, Roof, and hybrid energy system, etc. It’s Gentex’s Main Competitor. But Comparable or Not?
Multiples Mkt. Cap EPS P/E EV/EBITDA GNTX 3. 21 B 1. 17 19. 12 9. 77 MGA 10. 21 B 4. 20 10. 44 4. 54 DLPH 10. 16 B 3. 61 8. 57 4. 89 LEA 4. 22 B 5. 08 8. 27 3. 13 BWA 9. 17 B 4. 73 16. 90 8. 97 Target Price: $7 - $20 Gentex Current Price: $22 Source: Bloomberg & Yahoo!Finance
Financial Analysis Capital Structure 0 Debt Quick Ratio Data Source : 10 -K
Data Source : 10 -K
Data Source : 10 -K
Recommendation Current Price: $22. 05 DCF: $27. 2 - $35. 5 Multiple: $7 - $20 Buy 200 shares at market price, about 1. 5% of the portfolio
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