On Friday, Deutsche Bank (ETR:DBKGn) initiated coverage on Brembo S.p.A (BRE:IM), a prominent supplier of brake components and systems, with a Buy rating and a price target of EUR 13.00. The firm highlighted Brembo's position as a pure-play supplier with a premium angle, which stands out in the challenging auto supplier environment.
The analyst from Deutsche Bank pointed out Brembo's solid financials, noting that the company's EBIT margin and leverage profile are above the sector average, with key performance indicators (KPIs) at approximately 11% and 0.7x, respectively. This is compared to an average supplier's EBIT margin of about 6% and leverage at 1.5x.
The coverage report forecasts that Brembo will continue to lead the sector in terms of KPIs. It is anticipated that the company's revenues will grow at a compound annual growth rate (CAGR) of around 5% until 2026, while EBIT is expected to grow at a CAGR of approximately 10%.
Deutsche Bank's assessment also reflects a positive outlook on Brembo's valuation. The analyst believes that the current valuation is undemanding, especially when considering the medium- to long-term prospects of the company and its relative margin profile compared to the average supplier in the industry.
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