Equity Research
COMPANY FLASH
21 May 2015
AMAG
Roadshow with the company
Austria
Our conclusion
Steel & Metals
Reuters: AMAV.VI
Bloomberg: AMAG AV
Hold
Closing price as of
20-May-15
EUR 32.50
Target price
High/Low (12M)
Market cap.
We hosted a Roadshow with CFO and IR in Frankfurt. The day supported the view we
highlighted in our Update from 11 May that AMAG is a company with solid growth
potential and an attractive dividend. The targeted EBITDA of 130-140mn for 2015 seems
to be well secured.
EUR 35.50
EUR 33.93/22.50
EUR mn 1,146
AMAG is trading at a P/E of 17 and an EV/EBITDA of 8 based on 2016 consensus.
It is ambitious but not that expensive.
Facts & Analysis
Analyst:
Christian Obst, CEFA
+49 89 5150 1805
[email protected]
AMAG has a strong order book and a positive view on aluminum demand in the
mid to long term. The plants of AMAG 2014 are ramping up as planed.
The management ordered most of the new equipment for the 2020 project and building
should start in 2H15. Demand from the transport sector, especially the automotive
industry is strong and it seems that the trend towards aluminum applications is gaining
further speed. A lowlight is the demand for bright products as the trend towards LED
reduces the requirements for aluminum in lightning products. The demand from the
packaging industry is stable, as always, and the main customer like to grow with AMAG
also in the future.
AMAG 2014: AMAG is ramping up the hot rolling mill with one shift and is in the process
to certify the products which they shifted from the old mill to the new line. This process
could take months to more than two years. The automotive industry is short of reliable
suppliers as demand grows strongly and therefore, the process is quicker. The airline
industry has an established system of suppliers and contracts and production is facing
some delays in certain areas. Therefore, they are not in a hurry to certify new lines.
AMAG 2020: AMAG has ordered most of the technical facilities. Start of the work should
be early 2016 and the ramp up-phase should begin mid 2017. At the end of the
investments, a successful ramp-up of the facilities (volume & quality) and all
requirements concerning licensees of products AMAG should be able to produce more
than 300,000 tons vs. 170,000 in 2014. We expect this number not before 2019/20.
AMAG launched a program to reduce working capital and a first impact was the cash
generation during 2H14 supporting also the increase of the dividend. Going forward,
the task of the management is a stable level of inventories despite the planned increase
of production and shipments. However, the main goal is not pure cash generation but the
optimization of the flow/usage of the material through the production process.
Dividend policy: The former dividend policy of 20%-30% payout ratio is under review.
A new policy will be communicated in the course of the year. We think that they will
almost keep the current level of dividend also in the coming years with high investments
as underlying operational cash flow should remain strong.
Below EBITDA: Depreciation will increase by approximately EUR 10mn because of the
investments into AMAG 2014. The net interest payments will also increase, but only by
a low single digit number because of the slight rise in debt and the expected start of the
financing requirements for AMAG 2020. AMAG guide for a normalized tax rate
between 25% and 27% as the activated all remaining tax loss carry forwards in 2014.
Cash tax might equal the reported tax from 2017 on.
Key financials
Valuation ratios
EUR mn
2013
2014
2015E
2016E
2013
2014
2015E
Sales
786.4
823.0
922.9
997.5
x
EV/Sales
1.1
1.2
1.4
2016E
1.4
EBIT
72.4
56.1
70.7
88.6
EV/EBIT
11.9
17.8
18.8
15.9
EPS adj. (EUR)
1.59
1.65
1.38
1.76
P/E adj.
14.2
15.1
23.6
18.5
Source: Company data, Baader-Helvea Equity Research
Important disclosures: Please read information on the last pages of this report
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Equity Research
COMPANY FLASH
AMAG
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AMAG price chart
Percentage of companies within this rating category
Buy:
Hold:
Sell:
2
43.7%
48.5%
7.8%
21 May 2015
Equity Research
COMPANY FLASH
AMAG
Contacts
Volker Bosse, CEFA
Co-Head Equity Research
+49 89 5150 1815
[email protected]
Andre Remke, CFA
Co-Head Equity Research
+49 89 5150 1816
[email protected]
Gerhard Schwarz, CEFA
Head of Equity Strategy
+49 89 5150 1812
[email protected]
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Andreas von Arx
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Odile Rundquist, Ph.D
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Stefan Gächter, CFA
Christine Reitsamer, CFA
Peter Rothenaicher
+41 43 388 9261
+41 43 388 9262
+49 89 5150 1811
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[email protected]
[email protected]
[email protected]
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Christine Reitsamer, CFA
Jan-Hauke Jendrny
+49 89 5150 1816
+49 89 5150 1811
+49 89 5150 1803
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[email protected]
[email protected]
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+49 89 5150 1805
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Heinz Imbacher
+49 89 5150 1812
+49 89 5150 1018
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21 May 2015
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