Trailer Rebound In EMEA 2025 Will Spur Expansion

Key Takeaways

• Anticipated EMEA trailer market rebound and infrastructure investment in Germany and Ukraine could drive growth in SAF-Holland's revenues.
  
• Strategic positioning amid emission regulations, coupled with robust aftermarket business and cost management, could stabilize revenue and enhance profitability.
  
• Declines in the OE segment, APAC investments, and tariff uncertainties highlight potential revenue growth challenges and margin pressures for SAF-Holland.

Catalysts

Manufactures and supplies chassis-related assemblies and components for trailers, trucks, semi-trailers, and buses.

• The company expects a rebound in the trailer market in EMEA in the second half of 2025, with improving order intake, which could positively impact revenue growth.
  
• The potential for increased government infrastructure investment in Germany and the reconstruction of Ukraine could drive demand for SAF-Holland’s products, supporting higher revenues.
  
• Finalization of emission regulations and potential tariff changes in the U.S. could lead to shifts in market demand, which the company is well-positioned to navigate, potentially stabilizing or boosting revenue.
  
• The robust aftermarket business and expansion in new products and acquisitions are anticipated to provide stable revenue streams and contribute positively to the adjusted EBIT margin and overall profitability.
  
• Continuous cost management measures, including efficiency improvements and adjustments in personnel costs, are expected to help maintain or potentially improve net margins despite market fluctuations.

SAF-Holland Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming SAF-Holland's revenue will grow by 3.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.1% today to 4.9% in 3 years time.
• Analysts expect earnings to reach €103.2 million (and earnings per share of €2.27) by about April 2028, up from €77.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.0x on those 2028 earnings, up from 8.9x today. This future PE is greater than the current PE for the GB Auto Components industry at 11.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.34%, as per the Simply Wall St company report.

SAF-Holland Future Earnings Per Share Growth

Risks

• The weakening momentum in the OE equipment market, particularly in the truck and trailer segments in regions like EMEA and North America, resulted in a notable decline in organic sales by 15.5% for the year. This could impact future revenue growth if market recovery is slower than anticipated.
  
• Despite an overall robust aftermarket business, the OE segment's decline in sales by 19.6% reinforces concerns about its contribution to SAF-Holland's total sales, potentially affecting future revenue and operating margins.
  
• In the APAC region, restricted government investments in infrastructure projects in India and the postponement of new investments have negatively impacted sales, leading to a 9.4% decline in the fiscal year, reflecting risks to revenue growth in this key market.
  
• The imposition and uncertain future of U.S. tariffs pose a significant risk, with potential to affect both production costs and sales pricing, thereby impacting net margins and the company's competitive positioning.
  
• Continued inflationary pressures and anticipated increases in personnel costs present risks that could outweigh efficiency and cost-saving measures, potentially putting strain on future earnings and compressing net margins.

Valuation

• The analysts have a consensus price target of €22.3 for SAF-Holland based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €27.0, and the most bearish reporting a price target of just €18.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €2.1 billion, earnings will come to €103.2 million, and it would be trading on a PE ratio of 12.0x, assuming you use a discount rate of 7.3%.
• Given the current share price of €15.1, the analyst price target of €22.3 is 32.3% 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.