autoliv is ready for auto industry disruption

by:INDUSTRIAL-MAN     2019-08-20
Autoliv (ALV), the Sweden-
The US-based auto parts maker is one of the largest companies in the field.
Including the joint venture, the company employs more than 72,000 employees around the world, serving 27 countries around the world.
The stock has risen a lot in the past few months, which makes the current valuation a little premium.
However, due to its leadership and the fact that the field of safety and electronics will not be disturbed by significant changes in the automotive industry, I would recommend buying this stock.
How you buy depends on your preference for risk, but it is still \"buy and hold for a long time \".
Let\'s take a look at the long term factors that make Autoliv a real attractionterm holding.
Although the company produces a lot of products, all of them are for the automotive safety system market.
From an operational point of view, the company has two departments: passive security and electronic products.
Its income of $ 51% is about 2017.
4 billion comes from airbag and steering wheel products, 27% comes from safety belt products, 10% comes from restraint control, 7% comes from active safety, 5% comes from brake control system, the focus is obviously safety.
Source: autoliv-related reason is that self-driving technology, connected cars and even steering driving will not disrupt the driver and passenger safety marketCar call options
With healthy market share in these safe segments, Autoliv\'s size and leadership will make it difficult for competitors to shake their position.
In addition, Autoliv spent nearly 7. 1% ($737 million)
Its net sales were $10.
R & D costs in the 38 billion fiscal year increased by $90 million over 2016.
Source: With the continuous growth of Autoliv sales, the scale of its R & D expenses will also continue to increase, helping the company to maintain a leading position, making it difficult for competitors to match the company\'s strong financial resources.
Source: AutolivFor any auto parts manufacturer, especially large manufacturers with annual sales of more than $10 billion like Autoliv, it is very important to have a large customer base and a wide geographical revenue distribution
Autoliv was not disappointed in this regard.
In fiscal 2017, nearly 73% of the company\'s revenue came from developed markets such as North America, Japan and Europe.
But a large part of it comes from China. 18%)
Other parts of Asia (9%)segments.
There is still a long way to go in developing markets to improve road safety records.
As these emerging economies improve, local government regulation and competition between automakers will create a stable demand for safety products.
In developed markets, autonomous driving technology, connectivity and non-
Combustion propulsion solutions will help stabilize demand and create opportunities for new product launches.
Source: Another thing that Autoliv shows is good for the company is its strong balance sheet, which will allow Autoliv to acquire the company when needed.
Autoliv to long-carry $0. 959 billion in cashRegular debt of $1.
321 billion at the end of the 2017 fiscal year.
Interest spending this year is only $61.
2 million, and the company paid $208.
7 million as dividends.
Operating cash flow is $935.
9 million, the balance sheet remains healthy to support the company\'s growth over the next few years.
ALV operating margin (TTM)
YChartsThe high single data-
The digital operating profit margin is the biggest challenge on Autoliv armor and management should work hard to improve over the long term.
At the current level, this is not too bad, but there is certainly room for improvement as it will provide more leverage for their R & D spending.
Therefore, due to its focus on safety and electronics, the company is in a good position to have a great influence in emerging markets and the cash situation is healthy.
But what are the market conditions and external forces driving future growth?
Product line-
Autoliv sales will continue to track sales of light vehicles around the world, so don\'t expect to grow rapidly.
This will be slow and stable and the acquisition will certainly play a role in supporting organic growth.
The most important driver of the Autoliv passive security constraint control system (RCS)
Sales for light vehicle production (LVP). Full-
Global light vehicle production hit a record high in 2017, with growth of just over 2% for the eighth consecutive year.
LVP increased by 5% in 2016 and 2015over-
The annual growth of LVP exceeded 1%.
According to the company\'s data, as of 2025, the composite growth rate of the passive security market is expected to be 3%, while the composite growth rate of the electronic market is expected to be 10%.
Source: investor representative, which means good prospects in the short to medium term.
Let\'s see how the company is valued and whether it\'s fair to buy at this price.
I have no doubt about Autoliv\'s long time
The term \"future\", but the current price point shows that its valuation comes with a premium, which is further validated by 19 times the forward earnings of the stock\'s current trading.
Given their leadership in several subsidiaries
Industry in auto parts market
No matter where the automotive industry is going in the future, these segments will remain relevant --
I believe this makes ALV a great long termterm holding.
The stock price has steadily risen over the past eight months, so I suggest investors wait for a bad quarter before adding ALV to the portfolio.
A little margin of safety will not hurt.
If you are not so risk averse, I suggest you open a small position, increase your position when you are on a bargain, and re-invest your dividend.
Disclosure: I/we have no positions in any of the stocks mentioned and no plans to start any positions in the next 72 hours.
This article was written by myself and expressed my views.
I received no compensation (
In addition to Seeking Alpha).
I have no business relationship with any stock company mentioned in this article.
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