On track for FY18 with strong H2 expected
Carclo is a leading global designer and contract manufacturer (FY17 sales 70% non-UK) of fine tolerance and often mission/safety critical components for the medical (46%), optics (5%), aerospace (5%) and luxury/supercar (27%) markets.One of Carclo’s many attractions is its broad spread of activities, spanning multiple geographies, technologies and vertical markets. When one division stumbles another picks up the baton. And so it has proved today, with the group saying this morning that it is “on track†to hit FY18 numbers, despite experiencing some H1 “challenges†in Technical Plastics (re: program delays and operational difficulties) on top of temporary weakness in Aerospace demand.
Better still, the vast majority of revenues are tied to long-cycle products, high client retention and OEM platforms with typical life-spans of between 5-20 years. Hence providing excellent forward visibility, with underlying H1 vs H2 PBT likely to be split circa 1/3rd : 2/3rds this year. Consequently, there is no change to our adjusted EBIT forecast for this year (£14.3m) and next (£16.9m).
In terms of valuation, we believe the stock (at 155p) remains cheap, trading on CY PER and EV/EBIT multiples of 12.1x and 9.9x respectively vs peer averages of around 20x and 16x (see below). This also compares favourably with our 200p/share sum-of-the-parts: calculated using FY21 EV/EBIT multiples of 14x for Technical Plastics (64% FY17 sales), 12.2x LED Tech (31%) and 10x Aerospace (5%), discounted back at 12%, and adjusted for central overheads, the pension deficit and net debt.
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