Martinrea stock is a buy, Paradigm says

The six-week auto strike in the United States was never really a big issue for Martinrea International (Martinrea International Stock Quote, Chart, News, Analysts, Financials TSX:MRE) but as it ends the stock is undervalued.

Martinrea price target

So says Paradigm Capital analyst J Marvin Wolff, who in a research update to clients October 30, maintained his “Buy” rating and one-year price target of $24.00 on MRE stock, implying a return of 110 per cent at the time of publication.

On October 30 General Motors reached a deal with the United Auto Workers that followed on similar agreements with Ford and Stellantis, owner of the Chrysler brand.

“We wholeheartedly believe our strike squeezed every last dime out of General Motors,” UAW President Shawn Fain said following the development. “They underestimated us. They underestimated you.”

The analyst says that we will learn more detail about the impact of the auto strike when MRE reports its third quarter results, but

“We expect that the impact of the strike on MRE in Q3 (to be reported in the next few days) was not significant as the strike began September 15, and the plants affected were low volume,” he wrote. “In Q4, the impact will be higher but MRE has substantial exposure to the models that were not shut down,
hence MRE was able to keep its plants open but some lines within the plants were quieted.”

Wolff has toned down his expectations for Martinrea’s top and bottom lines in this fiscal year. He expects the company will post EPS of $2.30 on revenue of $4.89-billion in fiscal 2023. He thinks those numbers will improve to EPS of $3.46 on a topline of $5.15-billion in fiscal 2024, estimates which have not changed.

Martinrea valuation

“Our valuation of MRE contains two parts: the base auto parts business and its 22.7% holding in NanoXplore (GRA-T, $16.00 TP, Buy),” the analyst concluded. “Our auto parts business valuation remains unchanged at $16.50 (based on applying 5.9x to our 2023 forecast). Our valuation of NanoXplore is based on MRE’s 22.7% ownership and equates to $7.65 per MRE share.

What does Martinrea do?

Martinrea is a globally recognized company specializing in the design, development, and manufacturing of metal parts, assemblies and modules, complex fluid management systems, and aluminum products. Their expertise primarily lies in the automotive sector, where they focus on lightweight structures and propulsion systems. By integrating cutting-edge technologies and innovative practices, Martinrea plays a crucial role in enhancing vehicle performance, safety, and fuel efficiency. Their operations are widespread, encompassing a global footprint that enables them to effectively serve major automakers worldwide, marking them as a key player in the automotive supply chain.