Valeo: One of The World’s Leading Car Component Manufacturers

Jean-Pascal Rolandez presented his in-depth investment thesis on Valeo (FRANCE: FR) at European Investing Summit 2014.

Valeo: One of the world’s leading car component manufacturers with key positions in its 14 segments (#1 or #2). Main competitors are Japanese company Denso and German company Bosch. The equity cheap versus the sector and intrinsically, as the market perceives it only as a cyclical company, but fails to take into account the “kondratevian” growth opportunities represented by favorable industry trends in: 1) fuel efficiency; 2) car electronics; and 3) emerging markets. Other positives are the management team (industrial and financial savvy), opportunity for operating margin improvement (currently at 7%), and modest leverage (net gearing <20%). Despite the share price appreciation of the last few years, Rolandez thinks the equity remains undervalued at an EV/EBITDA ratio of 4.8x (2015e), especially if the European car market (~50% of Valeo revenue) starts to recover. While the company is still perceived as “too French,” Rolandez actually likes the management and points to 30% of revenue being tied to German car makers (only 17% to French companies).

About the instructor:

Jean-Pascal is the manager of The L.T. Funds, a Geneva-based investment firm focused on a buy and hold strategy based on a limited number of European stocks with a 5+ year investment horizon. Jean-Pascal has more than 25 years of equity investment experience and has founded the first investment club at the leading French business school ESSEC. Prior to establishing The L.T. Funds, Jean-Pascal held various executive positions at BNP Paribas for 22 years, including as Paribas’ French equity strategist.

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