CMI - A Growing Affinity For Phinia

2024-06-06 18:26:41 ET

Summary

• PHINIA has outperformed its auto supplier peers and the S&P 500 since its debut, with the shares getting a boost from the Street rotating away from EV-driven names.
• The company's leverage to fuel injection technology, specifically gasoline direct injection, diesel injection, and alternative fuel injection, is worth more than the share price reflects.
• ICE-powered vehicles will likely remain a significant opportunity for another 15-20 years, and PHINIA has opportunities for profitable share growth and market entry/expansion.
• Low single-digit revenue growth and margin leverage from a growing aftermarket business and improving capital efficiency can support a fair value in the $50's.

As the transition from traditional internal combustion engine (or ICE) vehicles to electric vehicles (or EVs) has hit a few bumps, investors have taken another look at companies leveraged to more traditional powertrain components, and particularly those that could have a longer run of profitable cash generation even as the EV transition picks up....

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