E-mobility And Automation Will Unfold Mixed Future Results

Key Takeaways

• Aumann's focus on e-mobility and automation in high-growth industries is anticipated to drive significant revenue growth and enhance margins.
  
• Strategic investments and a strong balance sheet enable flexible growth via technology and market expansions, sustaining profitability and earnings.
  
• Aumann faces challenges in maintaining revenue growth and profitability due to decreased order intake and backlog, plus increased diversification risks.

Catalysts

Manufactures and sells specialized machines and production lines for components of electric and classic drive chain systems in Europe, the United States, Canada, Mexico, China, and internationally.

• Aumann's strategic focus on e-mobility and the growing demand for electric vehicles (BEVs) is expected to drive future revenue growth, particularly as global BEV sales are projected to see triple-digit growth over the next five years, with significant increases in the U.S. and Europe. This expansion is likely to bolster Aumann's revenue.
  
• The development and diversification into the Next Automation segment, focusing on growth industries like aerospace, clean tech, and life sciences, is anticipated to enhance revenue streams and margins as these markets require efficient and automated production solutions.
  
• Aumann's recent expansions into technologies such as converting for electrode manufacturing and a firm foothold in battery systems provide opportunities for growth and increased profitability due to high demand in these sectors, impacting future earnings positively.
  
• Aumann's strong position and history in automation and production solutions, combined with the introduction of modular system approaches and high-margin maintenance and service revenue, are expected to improve net margins as service revenues typically have higher margins than product sales.
  
• Aumann's strategic use of cash resources and a strong balance sheet position, including cash reserves of €145 million, allows the company to invest in technology and market opportunities flexibly. This is likely to sustain profitability and earnings in future growth phases.

Aumann Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Aumann's revenue will decrease by 0.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 6.8% today to 2.5% in 3 years time.
• Analysts expect earnings to reach €8.0 million (and earnings per share of €0.5) by about April 2028, down from €21.5 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 25.7x on those 2028 earnings, up from 8.0x today. This future PE is greater than the current PE for the GB Machinery industry at 16.8x.
• Analysts expect the number of shares outstanding to decline by 2.77% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.53%, as per the Simply Wall St company report.

Aumann Future Earnings Per Share Growth

Risks

• Aumann's order intake in 2024 was significantly lower due to a general reluctance to invest from OEMs, resulting in a 41% decline, which may negatively affect future revenues and earnings.
  
• The substantial reduction in order backlog by 39% suggests potential challenges in maintaining consistent revenue streams and could pressure future revenue and earnings.
  
• Despite high profitability, the significant decrease in order intake and backlog could lead to a decline in revenues for 2025, potentially impacting earnings adversely.
  
• As Aumann expands into new areas beyond automotive, such as aerospace, clean tech, and life sciences, there is a risk of diluting focus and capital, especially if entry into these markets does not yield the expected returns, impacting overall profitability.
  
• With a challenging market environment causing a reduction in new orders in 2024, maintaining historical revenue growth and strengthening net margins might become difficult in the near term.

Valuation

• The analysts have a consensus price target of €13.4 for Aumann 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 €15.1, and the most bearish reporting a price target of just €10.6.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €321.9 million, earnings will come to €8.0 million, and it would be trading on a PE ratio of 25.7x, assuming you use a discount rate of 5.5%.
  
• Given the current share price of €11.96, the analyst price target of €13.4 is 10.7% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.