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BSCR
@: blackswancorporateresearch@gmail.com
URL: http://blackswancr.com
Summary
Presentation of LISI
Key figures :
Management :
Competitors :
Strategic approach
Outlook :
Pragmatism :
Economic model :
10
SWOT analysis:
11
12
Forecast :
12
13
Forecast VS Consensus:
14
Valuation
15
15
Method Bates:
16
Method SOTP:
16
Comparable base:
17
18
Investment rating
19
19
Consensus :
20
Global rating :
21
Technical analysis
22
22
Mid-term trend :
23
24
Performance:
25
Conclusion
27
Presentation of LISI
LISI was created in 1968 from a merger of three family companies (Kohler, Japy and Viellard VMC). These
companies are now gathered in one same entity nammed (Compagnie Industrielle de Delle SA) holding 54,9%
of the capital of LISI.
Today, LISI is one the international leader in designing and manufacturing assembly compenents for
aerospace, automotive and at a lesser extent for medical implants industries.
Well-known clients
LISI through its three divisions provides components for large international companies :
LISI Aerospace : Airbus, Boeing, Bombardier, Dassault, Rolls Royce, Safran, ...
LISI Automotive : BMW, PSA, Renault-Nissan, VW, Daimler, Faurecia, Plastic Omnium,...
LISI Medical : Stryker, Spineway, Biomet, Ace Surgical,...
An international presence
LISI has a presence worldwide in 12 countries through 41 industrial sites and generates 65% of its sales from
export. 36% of its revenue come from Europe of which from France (Aerospace industries) and from Germany
(Automotive industries).
The groupe also has a presence in North America (USA, Canada), in Europe (France, Germany, Spain, Pologne,
Czech republic,UK) and in Asia (China and India).
Key figures :
During the past four years, LISI recorded a steady
growing consolidated revenue with compound annual
growth rate of +10,44%.
The revenue growth affects the entire business of LISI
with a strong growth coming from Aerospace activities (CAGR of +16,25%). The Automotive and Medical divisions had respectively recorded a CAGR of
+2,14% and +4,48%.
As a whole, the figures show a steady growth, however during the last fiscal period, the generation
of revenue seems to slow down if we take into consideration a TTM basis ratios (Margins steady
over the time).
Regarding its financial structure, LISI shows a low leverage with an average Net Debt/EBITDA of
x0,80 and an average Net Gearing of 21,84%.
Investment thesis : LISI
Management :
Board of Director:
Nom
Gilles KOHLER
Age
59
Title
Emmanuel VIELLARD
52
Other titles**
Delle SA
Capucine ALLERTON-KOHLER
Eric ANDRE
64
Isabelle CARRERE
Director
Director
Director Tipiak SA
Director
Patrick DAHER
55
Independent Director
Pascal LEBARD
53
Independent Director
Lise NOBRE
50
Independent Director
Christian PEUGEOT
62
Director
Thierry PEUGEOT
58
representative of CIE
Industrielle de Delle SA
Marie-Hlne RONCORONI
55
Director
Cyrille VIELLARD
38
** Significant titles
Around 54,87% of the capital is hold by Compagnie Industrielle de Delle SA, this company brings
together the three major founding families of LISI, namely, Kohler, Viellard (VMC) family.
Note, the stake of Peugeots family into LISI Group through FFP SA (Holding family), which has in
additional of voting right, serves on the Board of Director of LISI Group and Cie Industrielle de
Delle.
To conclude, the stake by one of the notorious sovereign fund Norges Bank, this sovereign fund
is well-known for its strict investment decisions. The presence of Norges Bank means that LISI
meets ESG criteria (Environmental, Social and Governance).
The stock is barely liquid, after taking into account the differents stakes by the main shareholders,
the floating theoric of LISI Group is around 31%.
Competitors :
LISI faces to numerous competitors on its three divisions, these competitors are, for the most part
Intermediate size companies, there is not much piece of information due to the majority of these
companies are not listed.
Strategic approach
Outlook :
LISI operates on a growing market and aims to reach for its three divisions combined a CAGR from
+3% to +5% over a mid term period.
This leads, in a first time, toward an external growth with an aim of market share gain by focusing
into a long term clients-supplier partnerships, high industrial quality and by the R&D
(Innovation).
LISI seeks a raise of its export by focusing North America aera.
The company wishes to develop its market share and its revenues by the external growth
(partnerships, joint-venture, M&A, ...). This type of growth concerns its divisions.
The objective : a better balanced business, a sustainable and profitable growth and a financial
independence.
Pragmatism :
LISI Aerospace:
In order to lead its development to success, LISI is finalizing its industrial reorganisation. The
investments will be dedicated to the opening of new business units in particular in France, in UK,
USA, Canada and modernization of Manoir Aerospace (its recent acquisition).
These investments have been realised in a perspective of rising its industrial candecy especially for
one of its clients Airbus (A350) starting from 2017.
Partnership with Poly-Shape with the creation of a joint-venture, LISI will hold 60% and 40%
account for Poly-Shape, the new entity will be denominated LISI Aerospace Additive
Manufacturing.
Poly-Shape is a french-based company specialized in designing and rapid manufacturing of
functionals compenents. With its partnerships, LISI, this new entity will seek to become one of the
leader in the designing and manufacturing functionals parts (such as aerospace mechanical parts)
using the 3D technology.
LISI Automotive :
LISI might ride the growing wave in Asia auto sales, the company is going to continue its
development into profitable activities.
This development results in updating and maintaining of its industrial tools (Information System,
equipment,...).
LISI Medical :
The development of this division will result in investing for an increase in industrial capacities and
also, in renewing equipment.
The total amount of investment for the development of its three divisions might be equivalent to
2015 representing a net investment of 111 Millions euros (7,6% of sales).
Economic model :
LISI is divided in three divisions: Aerospace, Automotive, Medical. The group LISI has thus a
worldwide presence in 12 countries through 41 subsidiaries.
An integrated model
The company is one of numerous subcontractors that compose the sector of Aerospace and
automotive, LISI has the supervision of its whole value chain, that is to say, from the designing to
the manufacturing and distribution, LISI also has at its disposal a R&D department dedicated to
the development of new product and the improvement of its current products.
The group LISI proceeds to strategic acquisitions in order to complete its vertical integration
model (cf. Acquisition of Manoir Aerospace, a company specialized in the forging of metal
compenents for the aerospace industry).
In a horizontal integration logic, LISI has realized, in the past, to :
The acquisition of Creuzet Aerospace, a french-based company specialized in the
manufacture of basic mechanical components which are found as well in many fuselage elements
as in commercial aircraft engine.
The acquisition of Indraro-Siren, specialized on the forming fuselage parts and the design
of products for commercial aircraft and helicopters.
LISI outsources a small proportion of its production, the subcontracting relates to specific
operations thermal processing and finishing (surface treatment and assembly).
10
SWOT analysis:
Strenghts
Weaknesses
Integrated model : Supervision of its whole R&D : R&D may burden the costs of development
value chain, LISI outsources a small
according the regulatory constraints.
proportion of its production.
Cadency : LISI has to be able to insure its
production rate required by its clients in case of
Customers : Diversified and qualified customers
(Most of them are leaders on their sectors), thus
strong increase in orders.
reducing the risks of non-payment.
Competitors : Competitive market
Cost of labour : A few of its subsidiaries are out of
Europe, which reduce its labour costs.
Investments : Les cots de structure peuvent tre
important.
Know-how : Industrial excellency.
Opportunities
Threats
11
We forecast an increasing revenue for the next three years, however, the figures remain prudent
subject to a sustainable growth in the sector of aerospace and automotive.
12
Regarding to the historical figures and the projection, all the aggregates are showing an excellent
financial stability, reflected by a low Net Debt/EBITDA ratio and a low Gearing and Net Gearing.
LISI has a low risk vis-a-vis its credit exposure, in details, all the borrowing lines of LISI group have
a low risk level, the interest rates have, for most of them, an EURIBOR 3 months implicit rate in
addition of bank margin. Note that the EURIBOR rate are decreasing due to the ECB monetary
policies.
In conclusion, the credit risk of LISI has a low level, all banking covenants of the group are widely
respected.
13
Forecast VS Consensus:
Our projections for 2016 and 2017 seem to match more or less with the consensus Reuters
regarding to the sales, EBIT and EPS.
14
Valuation
DCF (Discounted Cash Flow):
According the market data, The historical premium (5 years) is around 7,58%. The unlevered
sectorial beta is estimated to 0,9469, In taking into account the market profile of LISI, the levered
beta is estimated to 1,0911, thus, regarding to its financial leverage, we have a WACC estimated
of 8,33%.
Our DCF model estimates the value of LISI to 35,26 per share
15
Method Bates:
Based on forecasts of the accounts at 3 years, it is estimated
an adjusted EPS of 2,33 in 2018. The cost of capital is 9.95%,
it is the result of beta used in the DCF model (1.0911) and
market historical data (risk premium 5 years and risk-free rate).
LISI pay a recurring dividend, the pay-out ratio on its last year is
25,08%, we assume a sustainable and stable payout ratio for
the next three years.
Thus, the constant annual growth rate of its dividend for the
next three years is around 13,54%.
Source: Projection Black Swan CR
In conclusion, the Bates model estimates a PER in 2018 at x13,85, as, a value per share of 32,28
(13,85x2,33).
Method SOTP:
LISI has a diversified business, thus, it
is wise to use the method sums of the
parts.
the multiple chosen is median of the
EV/Sales from a comparable base.
The choice of the EV/Sales multiple
gives a more accurate view of the
valuation.
The method estimates a value per
share of 35,56
16
Comparable base:
Source: Reuters/ZoneBourse
This table summarizes all the data used to set a median and an mean multiple sector for the
evaluation of LISI
In conclusion, the mean of all the valuation method employed, estimate the value of LISI at 32,81
corresponding to an upside of 41,71% based on the current share price at this time (23,15).
The horizon estimated to this fair value is 2,6 (3) years (mean durations of the methods used).
17
The data gathered estimates a PEG <1 this ratio means that LISI is undervalued but it also mean
that the company has a value profile.
18
Investment rating
Institutional shareholders (Movers) :
19
Consensus :
Source: ZoneBourse/Reuters
20
Global rating :
Depending on the benchmark and the group's financial data, the overall rating is 6/9 of LISI. The
company has good ratios include PEG and Gearing which implies a value undervalued and lowrisk.
21
Technical analysis
Short term trend :
The daily trend is bearish if we refer since September 2015 (like all the markets). If we stand to the
short term trends over the past weeks, LISI has rallied since its lowest performance during this
year to 19,027, boosted by its financial perfomance and by the basic trend of the market fell
sharply mid-February.
Over the last weeks, the value is about to be over-bought (RSI and Bollinger band), a downturn is
possible towards its moving average 150 at first, a drop toward its average may bring the value by
its resistance to 22,479.
22
Mid-term trend :
On a mid-term period, LISI will be in phase of bullish and moderate recovery, this trend is
conffirmed by positive MACD and a RSI near neutral (52,73).
LISI is now progressing beyond its moving average 150 weeks and is in way towards its moving
average 50 weeks.
A slight consolidation may be expected due to 7 weeks bullish out of 8.
23
On long term period, LISI was bullish, however, since 2014 the MACD and RSI are moving
downwards.
Technically we could see forming a graphical configuration type "shoulder - head - shoulder chart"
if the monthly resistance of 25 is not broken.
24
Performance:
10 years performance
5 years performance
25
1 year performance
26
Conclusion
Fundamentally, the group LISI is stable, It demonstrates an excellent financial health (low
levereged, Interest rates are decreasing, which gives a low credit risk), the companys outlooks are
clear even if the sector is very competitive, moreover its strategic plan remains prudent but
ambitious.
LISI pays a modest but recurring dividend (regarding its yield). In addition, its PEG indicates that
the company is undervalued.
From a technical analysis view, the opinion differs, the technical indicators are bearish and we
think that the area of 20-21 remains a good entry point.
27