Author Topic: FCAU - Fiat Chrysler Automobiles  (Read 859038 times)

whatdadil9

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2620 on: June 10, 2018, 07:35:50 AM »
Yes. I have.

Heres the back of the envelope math:

500m EUR of EBIT in 2017 and improving on 5bn EUR of sales: 10 pct EBIT MARGINS.

Lets say does 550 EUR of EBIT in 2018... Thats approximately 650 of USD EBIT.

Heres the delta. Sellside is using multiples from several years ago when they explored the sale of components in its entirety or just Marelli.


Auto supplier mutliples have grinded higher where OEMS have not over last several years. Hella lights with 8 pct EBIT margins trades 12x EBIT where APTIV trades at 17x - 18x with 12ish percent EBIT margins and exposure to autonomous, etc.

Given the absolute size of 550 EUR of EBIT relative to VC which trades 13x EBIT and lower margins, MM should get at least a 13x multiple.

13x 650 is 8.5 BN USD or almost 6 USD a share.

What I dont understand is how FORD can trade 5x 2018 EBIT with 5 pct EBIT margins and we can trade 1.5x 2018 EBIT ex Marelli.

Our mix, margins, cf, also all improving.

18 BN EV today for something thats going to generate 32bn of FCF over next 4 years?

This is also not including FINCO opty?

FINCO will smoothe sales in the downturn as well and we will have little legacy risk to underwriting unlike our competitors.

One last point:

Has anyone actually bridged their EBIT projections against their unit goals. If you take their unit goals for each brand and make conservative assumptions on incremental margins, we get far in excess of 25 BN USD EBIT... much higher than forecasted.

Also, take the projected balance sheets in each year with the corresponding interest expense and tax rate and the cash flow and net income figures dont bridge either... they are much to light.

What am I missing?


RadMan24

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2621 on: June 12, 2018, 10:49:52 PM »
Multiple projected to be 7-9 range. Closer to 7, Not 13. If 13 or above they would just do ipo and raise cash to reduce fcau debt. However, itís just going to be spin-off loaded with some fcau debt. Look at German and frence peers trading multiples.

whatdadil9

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2622 on: June 13, 2018, 05:24:50 AM »
those companies dont have 10+ pct ebit margins. and sergio now told you wat margins are.

cameronfen

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2623 on: June 13, 2018, 10:43:41 AM »
those companies dont have 10+ pct ebit margins. and sergio now told you wat margins are.

In my opinion (and maybe the market differs), having 10+% margins versus 5% margins should maybe equate to maybe more than one turn of EBIT.  You already are getting the benefit of higher earnings which even at the same multiple results in a more valuable company than a lower margin business (assuming the same revenue).  There, perhaps, is some value in higher margin companies being safer, but that is a second order effect and should result in significant multiple expansion. 

Ian L

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2624 on: June 14, 2018, 05:51:51 AM »

Has anyone actually bridged their EBIT projections against their unit goals. If you take their unit goals for each brand and make conservative assumptions on incremental margins, we get far in excess of 25 BN USD EBIT... much higher than forecasted.

In excess of 25BN. That is an exciting number!  8)

I have not gone though and analysed the presentation that way but what a great way to look at it. For example with Jeep, do you happen to know what the incremental margins should be and what they have been?


whatdadil9

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2625 on: June 14, 2018, 12:21:43 PM »
There is a direct correlation between ebit margin and mulitple. look at aptiv vs hella vs visteon vs borg warner.

Higher margin / higher roic / higher multiple. QED.

This is not a 7x ebit multiple biz. QED. (and if it is then the rest of their peers with comparable margins that are trading 12-15x are too).

Granted ebit mulitples should be higher now based on FCF yields being higher based on tax rates. Look at ebit multiples of netherlands companys vs us long term...

Jeep segment margins are prob around 15 pct. I think incrementals are higher but if you do 20-25 pct incremental or more math gets even more crazy.

Hard to assume with fix cost utilization incrementals are same as segment but that is what we are assuming.




cameronfen

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2626 on: June 14, 2018, 01:56:34 PM »
There is a direct correlation between ebit margin and mulitple. look at aptiv vs hella vs visteon vs borg warner.

Higher margin / higher roic / higher multiple. QED.

This is not a 7x ebit multiple biz. QED. (and if it is then the rest of their peers with comparable margins that are trading 12-15x are too).

Granted ebit mulitples should be higher now based on FCF yields being higher based on tax rates. Look at ebit multiples of netherlands companys vs us long term...

Jeep segment margins are prob around 15 pct. I think incrementals are higher but if you do 20-25 pct incremental or more math gets even more crazy.

Hard to assume with fix cost utilization incrementals are same as segment but that is what we are assuming.

It seems like to me like you are taking critiques of the stock to personally.  We are all only trying to make money.  Regardless of comps I don't get the idea of higher margin = significantly higher multiple.  Now higher ROIC = higher multiple, I definitely get but while this has high margins according to you (I didn't verify but I'll accept.  It seems to have low ROIC which is what is most important in determining a multiple expansion.  A company with high margins and low ROIC has no advantage as a compounded and the only befit of margins is second order (less volatility in downturn).   

According to this report: https://www.fcagroup.com/capitalmarketsday/Presentations/FCA%20June%201%202018%20CMD_BP%20Financial%20Overview.pdf on page 3, MM spends 600M Euro on capex.  Fiat as a whole roughly depreciates 20% of total capital every year. Thus my best guess is that MM has approximately 3B of capital. 

Based on this presentation: https://www.fcagroup.com/en-US/investors/events/quarterly_results_presentations/FCA_2018_First_Quarter_Results_Presentation.pdf the components division is on pace for roughly 500M Euros in EBIT (at 5% margin (but maybe that's the other stuff)).  Even excluding the rest of the assets, ROA on just machinery and equipment is only at 16%.  For all of Fiat, machinery and equipment were only 30% of total assets.  This may or may not be high margin business, but the only thing that actually counts is ROIC and it seems to be quite low. 

Your valuation is also way out of the range of analysts who say $4.4 B to 6.1B valuation. 

Not trying to be a downer, but I think your valuation is too optimistic. 

whatdadil9

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2627 on: June 14, 2018, 02:11:01 PM »
Look at presentation from analyst day.

5bn euro and 500 mm of ebit for just magnetti part. means other components businzess doing 5bn euro or whatever at 0 pct margin.

HENCE MAGNETTI SPIN NOT COMPONENTS!


cameronfen

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2628 on: June 14, 2018, 02:56:57 PM »
Yes that doesnt change my argument.  I even assumed you were correct with the 10% margin because I could not find.  That still doesnt change what looks like a low roic which unlike margins ultimately is what counts.  I shouldnt be getting in like a flame war on this forum anyway.  We all are here to make money and help each other make money. 

whatdadil9

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2629 on: June 14, 2018, 03:29:35 PM »
No flame throwing. Its just amusing how people try to use stock valuation to reverse engineer fundamental value. I try to go the other way.