FACC — 35 Shaping future mobility

FACC — 35 Shaping future mobility

Fischer Advanced Composite Components (FACC) is positioned to leverage the ramp up in civil aircraft production volumes. It is a pure play, Tier 1 supplier of composite structures and components to the civil aerospace and aeroengine segments. The company is focused on delivering market share growth across its product segments, supported by a healthy order backlog and a clear technological edge. The executive team is building confidence and executing the production plan, with recovered margins and improved cashflow.

Andy Chambers

Written by

Andy Chambers

Director, Industrials

FACC

Aerospace and defence

Price

€16.72

Market cap

€766m

Share price graph

Share details

Code

FACC

Shares in issue

45.8m

Net debt (€m) as at 31 August 2018

177.8

Business description

FACC is a Tier 1 supplier to the aerospace industry, 55.5% owned by AVIC of China. Composite structural components for Aerostructures (47% of FY18 sales), Cabin Interiors (33%) and Engines & Nacelles (20%). It employs 3,400 people across 13 sites internationally.

Bull

Civil aerospace programmes continue to ramp up, especially the Airbus A350 programme.

Margins expected to improve to 7–10% due to operating leverage as volumes rise.

A multi year investment programme in capacity and technology to deliver the $6.5bn order backlog and sustain profitable growth.

Bear

Executive management team needs to continue to build track record and restore credibility.

Chinese majority shareholding unlikely to decline, with a possible conflict of interest between AVIC and minority shareholders.

Company incurs costs as new programme are developed and transition to production.

Analysts

Andy Chambers

+44 (0)20 3077 5700

Annabel Hewson

+44 (0)20 3077 5700

Shaping future mobility

Fischer Advanced Composite Components (FACC) is positioned to leverage the ramp up in civil aircraft production volumes. It is a pure play, Tier 1 supplier of composite structures and components to the civil aerospace and aeroengine segments. The company is focused on delivering market share growth across its product segments, supported by a healthy order backlog and a clear technological edge. The executive team is building confidence and executing the production plan, with recovered margins and improved cashflow.

Lightness and efficiency

FACC was established in Austria and has operated as a niche specialist in the supply of carbon composite structures to the aircraft industry for nearly 30 years. It was taken over by the Chinese aerospace group AVIC in 2009 and was the subject of an IPO in 2014. Through rebuilding brand image and credibility, the business has gained market share. The company has invested in technology and automation of its production capacity.

Commercial programme ramp up

FACC technology is installed on almost all modern aircraft platforms, as the proportion of composite materials has increased on aircraft to reduce weight. With 50% of structural components on the newest generation of widebody aircraft (A350, B787) made from composites, compared to 28% on the A380 and just 3% in 1970, shipset values have increased. The shipset value for an A350 is €1.5m, for example. As production rates continue to increase, revenue growth for FACC should remain above 10%, with potential for margin expansion through improved pricing, operational leverage and cost reductions. In addition, FACC is seeing a shift towards the new growth markets, including China where it benefits from the involvement of its largest shareholder.

Valuation: Attractive growth trends

FACC is looking to deliver single-digit percentage revenue growth in FY19, with an ongoing goal to drive market share up in all segments. Its Vision 2020 strategy is working towards a FY21 revenue target of €1bn. In addition, we believe that civil aerospace market dynamics support the expectation of higher earnings and cashflow, indicating the potential for investors.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

02/17

705.7

19.5

0.33

0.0

50.7

N/A

02/18

750.7

52.4

0.87

0.11

19.2

0.7

02/19e

772.0

44.1

0.72

0.21

23.2

1.3

02/20e

849.7

58.7

0.97

0.31

17.2

1.9

Source: FACC, Bloomberg

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison's solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are "wholesale clients" for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document.
A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a "personalised service" and, to the extent that it contains any financial advice, is intended only as a "class service" provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited ("FTSE") (c) FTSE [2014]. "FTSE(r)" is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: TMT

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