Hyva Integration And Aitonomi Investment Will Expand Global Reach

Key Takeaways

• Acquisition of Hyva Group and expansion into Agriculture and Construction boost market share and profitability through enhanced presence and synergies.
  
• Investments in R&D and operational efficiency aim to drive revenue growth, improve margins, and attract ESG-focused investors with better sustainability.
  
• Heavy reliance on M&A growth amid declining sales and integration risks raises concerns over sustaining revenue and profit margins.

Catalysts

Manufactures and supplies safety-critical systems for the commercial vehicle industry in Germany, Europe, North America, Asia, Pacific, and Africa.

• The acquisition and integration of Hyva Group are expected to enhance JOST Werke's market presence, particularly in the off-highway markets, which could lead to higher revenue growth and improved profitability through synergies.
  
• Expansion into the Agricultural and Construction business is anticipated to boost market share and contribute to revenue growth by positioning JOST as a global Tier 1 supplier.
  
• Increased investment in R&D, particularly with Aitonomi Group and Trailer Dynamics, is aimed at accessing pioneering technology in transport, potentially driving future revenue growth and enhancing profit margins.
  
• Strategic improvements in carbon footprint and operational efficiency, such as a significant reduction in CO2 emissions, could enhance net margins by reducing costs and attracting ESG-focused investors.
  
• The restructuring and regional realignment, particularly the strong regional footprint and flexible asset-light operations, are expected to improve resilience against market downturns and support stable earnings growth.

JOST Werke Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming JOST Werke's revenue will grow by 20.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.9% today to 5.5% in 3 years time.
• Analysts expect earnings to reach €103.4 million (and earnings per share of €6.94) by about April 2028, up from €52.6 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 10.6x on those 2028 earnings, down from 13.8x today. This future PE is lower than the current PE for the GB Machinery industry at 17.9x.
• 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 6.26%, as per the Simply Wall St company report.

JOST Werke Future Earnings Per Share Growth

Risks

• The acquisition of Hyva Group, while strategic, introduces integration and execution risks, particularly in achieving promised synergies by 2026, which could impact future earnings if not realized as planned.
  
• The organic sales decline of 18% in Europe and 27% in North America signals a challenging market environment which may continue to affect future revenue if market conditions do not improve as expected.
  
• Despite investments in strategic projects, the overall adjusted EBIT declined by nearly 20%, suggesting a potential strain on margins if sales volumes do not recover as projected.
  
• The business outlook heavily relies on M&A-driven growth rather than organic market improvement, creating uncertainty in sustaining revenue and profit margins if acquisition-related risks are not effectively managed.
  
• The ongoing uncertainty in the North American market, specifically regarding trucks and tariffs, could limit the ability to increase sales and profitability, impacting revenue predictions for that region.

Valuation

• The analysts have a consensus price target of €65.4 for JOST Werke 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 €75.0, and the most bearish reporting a price target of just €55.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.9 billion, earnings will come to €103.4 million, and it would be trading on a PE ratio of 10.6x, assuming you use a discount rate of 6.3%.
• Given the current share price of €48.7, the analyst price target of €65.4 is 25.5% 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.