2021-12-05-瑞士信贷集团-2021年CS工业大会_机械_机电工程重点_27页_902kb

2021 CS Industrials Conference Machinery/E&C Highlights Summary

Core Content Overview

The 2021 CS Industrials Conference provided insights into the Machinery and Engineering & Construction (E&C) sectors, highlighting strong demand trends, ongoing supply chain challenges, and strategic initiatives across key companies. The infrastructure bill was seen as a significant driver of growth, with funding certainty and support for multi-year cycles. Companies are leveraging the bill, along with other secular tailwinds such as electric transmission, renewables, 5G, and energy transition, to position themselves for future opportunities.

Main Demand Trends

• Strong Demand into 2022 and 2023: Most markets show continued demand, supported by secular growth areas and the infrastructure bill.
• NA Truck Demand: Strong backlog for 2022 with order activity shifting to 2023, although OEMs are cautious due to inflation uncertainty.
• Mining CapEx: Positive inflection with $28B of front-end work, expected to convert to EPC tied to copper, gold, and lithium.
• EV Growth: Companies are expanding their EV offerings, with notable progress in electric fire trucks, charging stations, and sustainable transportation infrastructure.
• Infrastructure Bill Impact: Expected to accelerate spending in 2H'22, with 50% of the spend flowing immediately and the rest through grants.

Supply Chain & Pricing Challenges

• Supply Chain Disruptions: Persistent and expected to continue through at least 2H'22, affecting lead times and production.
• Material Cost Inflation: Expected to moderate in 2022, with pricing likely to remain sticky.
• Labor & Freight Costs: Continued challenges, but companies are implementing strategies to mitigate these risks.
• Price Cost Pressures: Persisting through early 2022, with companies taking price increases and expecting to be caught up by Q2.

Company-Specific Takeaways

Jacobs Engineering (J)

• ESG Growth: $5B in ESG revenues, with significant focus on water, environment, and sustainability.
• Infrastructure Engagement: Active in helping clients access funds and adopting global charging station designs.
• M&A Strategy: Focused on smaller, technology-based acquisitions to enhance data capabilities and sustainability.
• EPS Target: $10 by 2025, with significant savings expected from Focus 2023.
• Peer Group: Aspirational peers include Accenture and Big 4, as J transitions to a value-added consulting firm.

Oshkosh Corporation (OSK)

• USPS Award: A major win with production expected in 2H'2023 and ramping to full production by 2024.
• EV Adoption: Starting to offer Total Cost of Ownership benefits, including electric fire trucks.
• JLTV Recompete: Confident in its position as the top supplier for the DoD, with a long-term outlook to 2040s.
• Capital Allocation: Plans to return cash to shareholders and invest in production capacity and product development.
• M&A Focus: Acquisitions like Pratt Miller to support growth in adjacent technologies.

The Manitowoc Company (MTW)

• Strategic Initiatives: Expansion in Asia Pac, Europe, and aftermarket growth through M&A.
• Infrastructure Bill Impact: Seen as a catalyst for a new crane cycle and demand in boom truck and construction sectors.
• Aftermarket Growth: Focused on increasing non-new machine sales, which have higher margins.
• Capital Allocation: Aims to improve EBITDA margins and is considering balance sheet recapitalization in early 2022.

Terex Corporation (TEX)

• Global Demand: Strong across all segments, with particular emphasis on aggregates, environmental, and utilities.
• Supply Chain Disruptions: Persistent component and logistics issues, affecting production and delivery.
• Price Cost Management: Taking multiple price actions, with a target of 25% incremental margins in AWP.
• Infrastructure Bill Benefits: Encouraged by permitting process improvements and long-term growth cycle expectations.
• ESG Transition: Increasing adoption of electric solutions, especially in AWP, with lifecycle cost parity expected.

Fluor (FLR)

• Backlog & Prospects: Strong backlog and $45B in prospects over the next 12 months, with a focus on cost-reimbursable contracts.
• Mining & Energy Transition: $28B in front-end work, with significant opportunities in copper, gold, lithium, and nuclear.
• Y12/Pantex Award: A major contract with a 5-year term and 5-year options, expected to generate ~$2.8B annually.
• EPS Target: $150M of annualized cost savings, with a 2024 EPS target and strong interest in NuScale and ATLS.
• Contract Structure: Shifting towards more collaborative structures in Europe, reducing risk exposure.

Rush Enterprises, Inc. (RUSHA)

• Demand & Production: Strong backlog for 2022, with production trough in Q3 and expectations for 2023.
• CARB Emissions: Anticipating increased demand for natural gas trucks ahead of 2024 regulations.
• FCF & Capital Allocation: Expected to generate ~$280M of FCF, with 25-30% allocated to growth and 35-40% to shareholder returns.
• M&A Activity: Acquired Summit, the second-largest Navistar dealer, enhancing regional coverage and service capabilities.
• Parts & Service: Strong absorption in Q3, with service growth catching up to parts.

Quanta Services (PWR)

• Storm Work Growth: Expected to generate $400M+ in 2021 and $200M in 2022, with base business growth.
• Capital Deployment: Has deployed more cash than the original model, with a focus on strategic M&A and E&C projects.

Key Information Summary

• Infrastructure Bill: Seen as a significant catalyst for growth, especially in 2H'22, with 50% of the spend expected to flow immediately.
• EV & Sustainability: Companies are increasingly focusing on electric and sustainable solutions, with strong investments in charging infrastructure and green technologies.
• M&A Strategy: Used to enhance capabilities, expand into new markets, and improve margins.
• Supply Chain & Pricing: Ongoing challenges with material and logistics costs, but companies are managing through price increases and cost control measures.
• ESG Integration: ESG is becoming a core part of business strategy, with companies like J and TEX leading in sustainability efforts.
• EPS Targets: Multiple companies have set long-term EPS targets, with strong execution and cost savings expected to support these goals.
• Capital Allocation: Focus on returning cash to shareholders, investing in growth, and optimizing balance sheets.

Summary of Company Highlights

Company	Key Focus	Strategic Initiatives	EPS Target	M&A Activity	ESG Integration
Jacobs Engineering (J)	ESG, infrastructure, M&A	Transition to consulting, expand in EV and sustainability	$10 by 2025	Smaller tech-based acquisitions	Strong ESG focus
Oshkosh Corporation (OSK)	USPS award, EV, defense	Expand production capacity, focus on fleet renewal	Long-term growth	Acquisitions like Pratt Miller	Moderate ESG focus
The Manitowoc Company (MTW)	Infrastructure, aftermarket	Expand in Asia Pac and Europe, M&A for growth	Double-digit EBITDA	Acquisitions of dealers	Strategic ESG integration
Terex Corporation (TEX)	Global demand, ESG	Shift to electric solutions, expand in aggregates and utilities	Multi-year growth	M&A in MP	Strong ESG focus
Fluor (FLR)	Mining, energy transition	Y12/Pantex award, NuScale, ATLS	$150M cost savings, 2024 EPS target	Strategic M&A, EPC work	Strong ESG integration
Rush Enterprises, Inc. (RUSHA)	Natural gas, FCF	Summit acquisition, expand mobile fleet	Strong FCF generation	Acquisitions for regional coverage	Moderate ESG focus
Quanta Services (PWR)	Storm work, E&C	Strategic M&A, E&C project expansion	Strong base business growth	M&A for E&C projects	Moderate ESG focus