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ATS Corp is a Top Pick, says Stifel GMP

A surge in electric vehicle bookings is good news for fans of ATS Corporation (ATS Corporation Stock Quote, Charts, News, Analysts, Financials TSX:ATS), according to Stifel GMP analyst Justin Keywood, who updated clients on the company in a Thursday report. Keywood maintained a “Buy” rating on the stock, saying ATS’ business has some nice recession-resistant attributes.

Cambridge, Ontario-based custom automation solutions company ATS Corp announced on Wednesday US$81.3 million in new EV order bookings from an existing original equipment manufacturer customer. ATS said the order includes work related to automated battery assembly systems and will be executed over the next 18-24 months.

“These bookings again demonstrate our ability to execute leading solutions in this dynamic space,” said Andrew Hider, CEO of ATS Corp, in a press release. “Through building strategic partnerships with our customers, and leveraging our ATS Business Model to continuously refine our offerings, we continue to navigate this evolving market while maintaining a steadfast focus on customer needs.”

Commenting on the news, Keywood said ATS has now secured US$458 million in EV orders within the past three quarters, while management continues to characterize its work in the EV theme as still in the early innings.

“We estimate a EV total addressable market of $8 billion for ATS, related to battery assembly only. EV represents roughly 15 per cent of ATS’ LTM sales but 34 per cent of the current backlog, highlighting robust growth,” Keywood wrote.

Reporting on ATS’ December investor meetings, Keywood relayed that management has yet to see headwinds form in the automation industry as a result of the looming recession, with particular strength coming from the EV segment. On the supply chain side, management said lead times have become extended for some components, but Keywood pointed out that ATS has an advantage over certain of its peers in that it typically has long-duration projects which can more readily absorb any supply chain delays.

“We continue to see a good backdrop of demand for automation and ATS generally outgrows the broader industry with its focus on valuable verticals. Industrial automation players appear to be better insulated from broader headwinds as well and a focus on ATS’ resilient verticals, including serving Tier 1 customers, further gives us comfort,” Keywood wrote.

On its financials, Keywood estimated ATS to generate full 2023 revenue and EBITDA of $2.58 billion and $426.4 million, respectively. Keywood’s maintained a 12-month target price of $66.00, which at the time of publication represented a projected return of 51.8 per cent.

“ATS’ stock drifted down at year-end 2022 and is currently trading at only 10x C2023 EBITDA versus peers at 15x. We think ATS is a great way to gain early exposure to the EV space, and remains our top pick,” Keywood said.

About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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