Mine Safety Regulation And Electrification Trend Will Drive Long-Term Braking Demand

Catalysts

About Advanced Braking Technology

Advanced Braking Technology designs and manufactures high performance failsafe braking and autonomous braking systems for heavy industrial and mining vehicles.

What are the underlying business or industry changes driving this perspective?

• Deepening regulatory focus on mine safety in regions such as South Africa and other hard rock jurisdictions is expected to accelerate adoption of failsafe and autonomous braking solutions, supporting sustained growth in high margin OEM and aftermarket revenue.
• Global growth in copper and gold production, underpinned by electrification and renewable energy investment, is driving mine expansions at operations like Oyu Tolgoi, Grasberg and Olympic Dam, which should increase unit volumes and raise total revenue.
• Mandated collision avoidance and Level 9 vehicle interaction controls at large mine sites are creating a structural need for interoperable autonomous braking products such as BrakeiQ, which can command premium pricing and enhance net margins.
• Expansion into international mining hubs across Africa, Asia and Latin America from an established Australian base broadens the installed brake base, lifting recurring consumables and spare parts sales and improving earnings resilience.
• Ongoing product diversification into additional vehicle platforms such as Hilux, telehandlers, crane trucks and heavy yellow equipment increases wallet share per site, supporting operating leverage and earnings growth as fixed costs are spread over a larger revenue base.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Advanced Braking Technology's revenue will grow by 13.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.3% today to 14.3% in 3 years time.
• Analysts expect earnings to reach A$4.0 million (and earnings per share of A$0.01) by about December 2028, up from A$1.8 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 19.3x on those 2028 earnings, down from 24.6x today. This future PE is lower than the current PE for the AU Auto Components industry at 24.6x.
• Analysts expect the number of shares outstanding to grow by 3.39% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.78%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• If the current boom in copper and gold development slows due to weaker commodity prices or reduced energy transition spending, expansion projects at key sites like Oyu Tolgoi, Grasberg and the Australian copper and goldfields could be deferred, lowering unit demand for new brake systems and pressuring revenue growth and aftermarket sales.
• ABT’s strategy is heavily tied to increasingly stringent mine safety and Level 9 collision avoidance mandates. If regulators delay enforcement or operators adopt alternative safety approaches that do not require interoperable autonomous braking solutions, expected uptake of products like BrakeiQ could fall short, reducing expected revenue scale and limiting margin expansion.
• The company is counting on rapid international expansion, particularly in Africa, Asia and eventually Latin America. However, execution risk in new geographies, such as distributor performance, certification delays, and local competitive responses, could slow the export mix shift from 45 percent to 57 percent, constraining revenue growth and operating leverage benefits.
• ABT faces both existing failsafe braking competitors and emerging technology threats from OEM integrated systems and alternative autonomous safety platforms. If larger players outpace ABT in innovation or undercut pricing in key markets like North America and South Africa, this could erode pricing power, compress net margins and cap earnings growth.
• The long term trajectory of mining technology is toward higher automation and potentially fewer light vehicles underground. If mine designs accelerate toward fully autonomous fleets that bypass ABT’s current vehicle platforms or use proprietary OEM braking systems, the addressable market for SIBS and retrofit solutions could shrink, dampening recurring aftermarket revenue and limiting future earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of A$0.14 for Advanced Braking Technology based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be A$28.0 million, earnings will come to A$4.0 million, and it would be trading on a PE ratio of 19.3x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of A$0.11, the analyst price target of A$0.14 is 21.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.