2022-12-20-瑞士信贷集团-U.S._Industrial_Technology_13页_605kb

U.S. Industrial Technology Post-Initiation Feedback Summary

Key Takeaways

• General Thesis: Feedback overall showed limited pushback on the automation/digitalization resilience thesis, driven by labor shortages and ROI, despite macro concerns like recession and weaker PMIs. Investors questioned differentiating factors from past cycles.
• Geography: CS base case expects flattish US IP, modest Chinese IP growth, declining European IP. Weak December PMIs suggest investor negativity exceeds this base case in the US, but there's optimism in China post-COVID. Focus is on ISM New Orders as a leading indicator.
• Investor Interest: Interest is split between current CS coverage clients and those waiting on the sidelines for weaker 2023 guidance to find entry points.

Sector Specific Feedback

• Machine Vision & AIDC (ZBRA, CGNX, TDY): Received the most attention; pushback less than expected. ZBRA is the most discussed stock. Conversations revolved around CGNX, AMZN capex, logistics market dynamics, and TDY's defense and imaging segments. Interest also sparked among new investors for TDY.
• Connectors & Sensors (APH, TEL): Some queries about APH's valuation compared to TEL's multiples, acknowledging APH's better execution and higher return potential.
• SMID Cap Multi-Industrials (DOV, VNT, STRC): DOV faced the most pushback, particularly on its 2023 organic growth forecast and target multiple, partly due to concerns about book:bill ratios, pricing, and a diversified portfolio. STRC discussions were limited to specialists expecting positive news. VNT saw reduced interest, but a target price hike aimed at investors.

Company-Specific Ratings & Targets (SNIP since this is summary)

• DOV: OUTPERFORM, $191 PT.
• APH: OUTPERFORM, $93 PT.
• CGNX: UNDERPERFORM, $41 PT.
• ZBRA: OUTPERFORM, $319 PT.
• TDY: OUTPERFORM, $503 PT.
• TEL: NEUTRAL, $123 PT.
• STRC: NEUTRAL, $4 PT.
• VNT: NEUTRAL, $21 PT.

Investment Highlights Summary

• FLIR acquisition adds unique capabilities to TDY in digital imaging.
• ZBRA focuses on productivity tools, expected resilient demand due to US labor shortages.
• CGNX faces short-term headwinds in logistics; AI/3D products offer margin potential.
• APH's diversified markets and organic growth potential are key strengths.
• TEL has strong auto content but faces auto production/production risks.
• DOV has multiple EPS growth levers, targets high-margin niches, weather concerns impact outlook.
• STRC offers unique robotic products but faces commercialization/grant turbulence.
• VNT is shifting away from ICE but faces slow transition and EMV headwinds.

Valuation & Risks Summary

General risks include weaker industrial/global auto production, commodity price volatility (copper, gold), FX fluctuations (especially EUR, CNY for TS). Valuations are sensitive to Treasury yields.

• Methodology: Targets based on revenue growth, incremental margins, and specific P/E/EV/Revenue multiples derived from CS's fundamental models.
• Risks: Tailored to each company (economic conditions, integration, deployments, clinical trials, regulatory actions for STRC).

Overall Tone

Analysts maintained an Outperform rating for key Industrial Tech names (DOV, APH, ZBRA, TDY) despite questions and macro concerns, citing strong structural drivers and specific company execution, while differentiating from weaker tech areas. Pushback was notable on specific targets like DOV, reflecting cautious investor sentiment integrated into target multiples.