EUR 850.00 For Business Accounts Only

Morningstar | Veoneer Is a Near-Pure-Play in Advanced Driver Assist and Autonomous Vehicle Technologies

We expect the adoption of advanced driver assist systems, or ADAS, highly automated driving, or HAD, and automated driving, or AD, technologies by global automobile makers to support estimated average annual revenue growth for Veoneer of roughly 12% for the next 10 years. We think that Veoneer has positioned itself as an integrator of technologies that are required as standard equipment by respective governments' New Car Assessment Programs, or NCAP. ADAS technologies enable automakers' vehicles to receive coveted four- and five-star crash test ratings.In 2016, The National Highway Traffic Safety Administration, or NHTSA, said that a total of 20 automakers had voluntarily agreed to equip all new passenger vehicles, by September of 2020, with low-speed automatic emergency braking, or AEB, that includes forward collision warning, or FCW, both of which are ADAS technologies. In a progress report at the end of 2017, NHTSA said that four out of 20 automakers made AEB standard equipment on more than 50% of their 2017 model year vehicles, while another five OEMs said that 30% of their vehicles produced in 2017 were equipped with AEB.Veoneer forecasts total addressable market growth of roughly 12%, going from approximately $20 billion in 2017 to $49 billion in 2025. The rapid growth in Veoneer's market results in high growth potential for order intake within a relatively short period of time. Current order intake stands at $1.2 billion versus 2018 revenue of $2.2 billion. Management guides that $1.0 billion in order intake accumulates to $4-6 billion in lifetime revenue. Once an order is taken, development for a vehicle program takes two to four years. The revenue generation phase lasts between four and six years. Veoneer's large and growing number of new contracts in development phase versus the lengthy period until revenue generation ramps-up, leads to estimated net losses through 2023. We also estimate positive free cash flow and economic profits in 2025, barring a downturn in the automotive demand cycle.