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Linamar Corporation

Recommendation: Speculative Buy

Entry Date Symbol Recommendation Entry Price (CAD) Target 1 (CAD) Target 2 (CAD) Holding Duration Position Status Return(%)*
27 Dec, 24 LNR Speculative Buy CAD 57.29 CAD 63.592 CAD 67.407 23 days Closed 2.98%

*Return(%) represent the percentage change between the entry price and exit price of the recommendation.

Fundamentals

  • Previous Close 66.36
  • Market Cap3833.80M
  • Volume12352
  • P/E Ratio15.15
  • Dividend Yield1.81%
  • EBITDA1538.94M
  • Revenue TTM10392.20M
  • Revenue Per Share TTM169.70
  • Gross Profit TTM 1513.27M
  • Diluted EPS TTM4.23

Data Powered by EOD Historical Data (“EODHD”).

Company Overview

Linamar Corporation, together with its subsidiaries, manufactures and sells engineered products in Canada, Europe, the Asia Pacific, and rest of North America. It operates through two segments, Mobility and Industrial. The Mobility segment offers electrified products, including 3P3200, e3P4100, and 3P5700 eAxle gearboxes; utility and medium duty platform eAxles; FlexForm conformable hydrogen storage tanks; structure and chassis, including front and rear subframes, semi-trailing arms, front knuckles, battery enclosures, crossrails, shock towers, and cross car beams; driveline products, such as differential assemblies, power transfer and rear drive units, and engineered gears; transmission products, which comprises gears and shafts, gearbox housings, shaft and shell assemblies, and clutch modules; and engines, including cylinder blocks and heads, connecting rods, camshafts, and balance shaft modules for battery, hybrid, and fuel-cell electric vehicles. This segment serves automotive original equipment manufacturers and commercial vehicle customers. Its Industrial segment provides compact and rough terrain scissor lifts, vertical mast lifts, telescopic and articulating booms, and telehandlers for the aerial work platform industry under the Skyjack brand; combine grain header attachments, self-propelled windrowers, pick-up and corn headers, and hay products under the MacDon brand; tillage and crop nutrition equipment under the Salford brand; and air seeders and carts, and ancillary delivery systems for the agricultural industry under the Bourgault brand. This segment serves construction equipment rental companies. The company also offers medical devices and precision medical components. Linamar Corporation was founded in 1964 and is headquartered in Guelph, Canada.

Key Positives

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

Key Negatives

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

Key Investment Risks

Availability of raw materials, labour market, supply disruptions, interest, foreign exchange, etc.

Recommendation Summary

Technical Summary

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.

Key Reasons for Speculative Buy

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.

Key Financials in Pictures

Income Statement

Balance Sheet

Change in Cash

Total Operating Cash

Dividends Paid

Data Powered by EOD Historical Data (“EODHD”).

Peer Comparison

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
-0.24 0.36% 66.12 15.15 6.47 0.37 0.67 0.49 4.13
MG
Magna International Inc
-0.35 0.62% 55.65 9.37 8.13 0.35 0.90 0.41 4.30
MRE
Martinrea International Inc.
-0.02 0.23% 8.72 - 4.87 0.13 0.41 0.35 3.95
XTC
Exco Technologies Limited
0.04 0.58% 6.95 9.93 6.49 0.42 0.67 0.57 4.49
WPRT
Westport Fuel Systems Inc
0.15 3.45% 4.50 - 144.93 0.24 0.38 0.24 16.63

Data Powered by EOD Historical Data (“EODHD”).

Disclosures:

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.

Technical Indicators Defined: -

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.

Disclaimer :
This report has been issued by StockNextt which has an Ontario Business Identification Number 1000958347 and British Columbia registration Number FM1051529 is a trade name under Kalkine Canada Advisory Services Inc. having Business Number 761925130BC0001. Kalkine Canada Advisory Services Inc. and StockNextt are collectively referred to as “StockNextt”, “we”, “us”, and “our”. The website https://stocknextt.com and associated pages are published by StockNextt. The information in this report and on the StockNextt website has been prepared from a wide variety of sources, which StockNextt, to the best of its knowledge and belief, considers accurate. StcokNextt has made every effort to ensure the reliability of information contained in its reports, newsletters, and websites. All information represents our views at the date of publication and may change without notice. The information in this report does not constitute an offer to sell securities or other financial products or a solicitation of an offer to buy securities or other financial products. Our reports contain general recommendations for investing in securities and other financial products. StockNextt does not offer financial advice based upon your personal financial situation or goals, and we shall not be held liable for any investment or trading losses you may incur by using the opinions expressed in our reports, publications, market updates, news alerts and corporate profiles. StockNextt does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. StockNextt’s general advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested. Please also read our Terms and conditions for further information. Employees and/or associates of StockNextt and its related entities may hold an interest in the securities or other financial products covered in this report or on the StockNextt website. Any such employees and associates are required to comply with certain safeguards, procedures and disclosures as required by law.

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