Chamberlin Plc One-off cost inefficiencies lead to lower forecasts

Hardman & Co Report Report DownloadsChamberlin Plc (LON:CMH) remains on track strategically, developing its product offering to the automobile turbocharger industry through expansion of its principal operational facilities. Revenue growth is meeting expectations but one-off in-house cost inefficiencies lead to lower forecasts. The risk/reward profile however remains favourable and the shares remain attractively valued both against its peer group and on a DCF basis.

Trading Update: Revenues for the 1H’ 17/18 financial year are in line with management expectations, reflecting overall good demand levels across the foundry and engineering businesses Demand for turbo charger bearing housings, a key growth driver for the group, continues to grow strongly. The two engineering operations, Exidor and Petrel, continue to trade in line with expectations. However, margins within the Group’s foundry businesses have been adversely affected by production issues. The Company is addressing these issues and is working very closely with the machine and tooling suppliers to rectify this one-off situation in the near term.

2017/18 Forecasts: Whilst management still expects group revenues for the year to be substantially ahead of last year but underlying profits are now only expected to be in-line year with the prior year. We have reduced our 2017/18 profitability expectations for the Foundries business and group underlying PTP forecasts from £1.94m to £0.76m. We are making minor adjustments to our 2018/19 forecasts.

Valuation: The shares remain lowly valued, trading on calendar 2017 EV/sales and EV/EBITDA of around 0.4 and 5.0 times respectively, compared with sector averages of 1.2 and 8.8 times respectively. Our DCF valuation, using a WACC of 10% suggests a fair value at around 200p.

Investment summary: Chamberlin Plc has repositioned itself from a traditional engineering company to become a key supplier to the automotive turbocharger sector. The shares offer the opportunity to invest in a cyclical stock with high operational leverage. The shares remain attractively valued against its peer group and on a DCF basis.

Click to view all articles for the EPIC:
Or click to view the full company profile:
    Facebook
    Twitter
    LinkedIn
    Hardman & Co

    More articles like this

    Hardman & Co

    Chamberlin: Trading update ‒ main businesses performing solidly

    Chamberlin plc (LON:CMH) recent trading update (23 November 2020) indicates that the group’s main businesses are performing as previously indicated, with the company continuing to take appropriate operational strategic actions. The group has been financially de-risked

    Hardman & Co

    Chamberlin: Trading update most encouraging

    Chamberlin plc (LON:CMH) recent trading update was most encouraging, considering these challenging times. The company continues to take appropriate operational strategic actions. The group has been financially de-risked, but financial forecasts continue to be inappropriate, given

    Hardman & Co

    Chamberlin Trading stalled in these unprecedented times

    Chamberlin plc (LON:CMH) recent trading update revealed that trading is stalling in these challenging times. The company, however, is taking appropriate strategic actions. The group has been financially de-risked, and the shares remain appropriately valued against

    Hardman & Co

    Chamberlin Plc Near-term trading subdued

    The recent trading update revealed sustained challenging markets. Chamberlin, however, is still on track strategically, and the group continues to develop its product offering most favourably. The group has been financially de-risked, and the shares remain

    Hardman & Co

    Chamberlin Management actions yield cautious optimism

    Trading remains difficult, and cost reduction measures continue to be implemented. Chamberlin is still on track strategically, and the group continues to develop its product offering most favourably. The group has been financially de-risked, and the

    Hardman & Co

    Chamberlin Plc Trading remains difficult; forecasts lowered

    Chamberlin Plc (LON:CMH), Prospects remain very uncertain, and cost reduction measures continue to be implemented. Chamberlin remains on track strategically. The group continues to develop its product offering to the automobile turbocharger industry through development of

    Hardman & Co

    Chamberlin Plc Trading very difficult; forecasts lowered

    Chamberlin Plc (LON:CMH), Prospects are very uncertain, and cost reduction measures are being implemented. However, the group continues to develop its product offering to the automobile turbocharger industry through development of its main operational facilities. The

    Hardman & Co

    Chamberlin Plc Trading healthy, technical issues improving

    Chamberlin Plc (LON:CMH) remains on track strategically, as good progress is made towards resolving the technical problems at the new machine shop. The group has consequently delivered a significantly improved performance in the second half of

    Hardman & Co

    Chamberlin Plc On-track; Turbo-charging into a new growth phase

    Chamberlin Plc (LON:CMH) is on track both strategically and operationally following its recent re-positioning move. The Group is developing its product offering to the automobile turbocharger industry through expansion of its principle operational facilities. The risk/reward