Recommendation: Speculative Buy
| Entry Date | Symbol | Recommendation | Entry Price (CAD) | Target 1 (CAD) | Target 2 (CAD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 27 Dec, 24 | LNR | Speculative Buy | CAD 57.29 | CAD 63.592 | CAD 67.407 | 23 days | 17.7% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Linamar Corporation, together with its subsidiaries, produces engineered products in Canada, Europe, the Asia Pacific, and rest of North America. It operates through two segments, Mobility and Industrial. The Mobility segment focuses on light metal casting, forging, machining, and assembly for electrified and powered vehicle markets. It also focuses on components and systems for global mobility market; and design, development, and testing services. The Industrial segment manufactures scissor, boom, and telehandler lifts for the aerial work platform industry. This segment also manufactures draper headers and self-propelled windrowers for the agricultural harvesting industry, as well as supplies farm tillage and crop fertilizer application equipment. Linamar Corporation was founded in 1964 and is headquartered in Guelph, Canada.
Higher Sales: CAD 2,635.7 mn in Q3 2024 vs CAD 2,434.2 mn in Q3 2023
Higher Free cash flows: CAD 269.6 mn in Q3 2024 vs CAD (123.9) mn in Q3 2023
Lower Net earnings: CAD 137.9 mn in Q3 2024 vs CAD 146.7 mn in Q3 2023
Higher Financial expenses: CAD 35.4 mn in Q3 2024 vs CAD 17.8 mn in Q3 2023
Availability of raw materials, labour market, supply disruptions, interest, foreign exchange, etc.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 57.29 | 48.1 | 63.592 | 67.407 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Healthy financials: In Q3 2024, the company generated revenue of CAD 2,635.7 mn, representing an increase of CAD 201.6 mn or 8.3% compared to Q3 2023, as it experienced growth throughout the business segments. Moreover, in the same reported period its net income stood at CAD 137.9 mn and free cash flows stood higher at CAD 269.6 mn.
Higher Gross margin percentage: Gross margin percentage increased in Q3 2024 to 14.4% compared to 14.0% in Q3 2023. Cost of sales before amortization as a percentage of sales decreased in Q3 2024 to 79.9% compared to 81.0% for the same quarter as last year. A significant increase in agricultural sales; and increased sales related to launching Mobility programs also helped in achieving higher numbers.
Higher automotive sales: North American automotive sales for Q3 2024 increased 11.4% from Q3 2023 in a market that saw a decrease of 4.9% in production volumes for the same period. As a result, content per vehicle in Q3 2024 increased 17.0% from CAD 246.94 to CAD 288.81. The increase in North American content per vehicle was mainly driven by increased sales related to the acquisitions in 2023 and higher volumes on programs that the Company has significant business.
Considering the expected valuation upside, improving volume, rich cash flows, healthy guidance, current trading levels and key business risks a ‘Speculative Buy’ recommendation has been given on the stock at the last closing price of CAD 57.29, as on December 24, 2024.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Cyclical Industry: Auto Parts
| Company | Change (CAD) | Price (CAD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| LNR Linamar Corporation |
0.98 1.98% | 50.48 | 6.03 | 5.92 | 0.34 | 0.63 | 0.49 | 3.51 |
| MG Magna International Inc |
0.29 0.59% | 49.20 | 11.83 | 6.95 | 0.41 | 1.02 | 0.45 | 5.62 |
| MRE Martinrea International Inc. |
0.23 3.28% | 7.25 | 6.11 | 4.38 | 0.16 | 0.53 | 0.36 | 3.20 |
| XTC Exco Technologies Limited |
-0.02 0.34% | 5.83 | 10.75 | 7.54 | 0.52 | 0.87 | 0.66 | 5.05 |
| WPRT Westport Fuel Systems Inc |
-0.42 7.75% | 5.00 | - | 144.93 | 0.30 | 0.46 | 0.28 | 51.87 |
Data Powered by EOD Historical Data (“EODHD”).
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels as on December 24, 2024. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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