Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Garrett Motion, Ushio Inc and more

In today’s briefing:

  • GTX: Motion for Commotion, Initiating with Buy
  • Ushio (6925 JP): New Guidance Jumped the Gun

GTX: Motion for Commotion, Initiating with Buy

By Hamed Khorsand

  • We are initiating coverage of Garrett Motion (GTX) with a Buy Rating and $15 target.

 

  • Garrett Motion (GTX, GTXAP) has emerged from bankruptcy protection with fewer distractions and focus on growing market share in turbochargers for automobiles.

 

  • GTX filed for Chapter 11 bankruptcy to settle outstanding asbestos claims that were part of a business Honeywell (HON) owned but was part of the GTX spin-off. GTX no longer has such indemnity exposure and has a simplified agreement in paying HON.

 

  • Continued growth in gasoline turbochargers creates a catalyst for sales growth over the next three years.

 

  • GTX’s development of its e-turbo turbocharger and fuel cell compressor gives GTX exposure to hybrid and fuel cell vehicles solidifying a long runway to grow sales beyond gasoline and diesel.

 

  • GTX’s stock is trading at a discount to peers and where the shares were prior to its financial issues even though the sales growth is likely to have linear characteristics for the next couple years.

Ushio (6925 JP): New Guidance Jumped the Gun

By Scott Foster

Ushio’s share price rose 49% from May 19 to July 2, from ¥1,423 to a 52-week high of ¥2,118.  This reflected growing optimism over the resumption of movie theater operations in Europe and America as vaccination proceeded and pandemic-related restrictions were relaxed.

On June 29, management announced a doubling of FY Mar-22 net profit guidance, in large part due to greater than expected sales of light sources for cinema projectors and projection equipment.

But the rapid spread of the Delta Variant of COVID-19 has undermined this optimism and the shares have since dropped back to ¥1,997. 

Take profits and wait until the impact of the current wave of infections is discounted.


Related tickers: Garrett Motion (GTX), Ushio Inc (6925.T)

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