Veoneer - A leading name in Swedish automotive safety technology

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I think Veoneer, a Swedish company that produces safety technology for passenger cars, deserves its own thread. The company has many similarities to SmartEye, which has generated a lot of interest.

Veoneer produces advanced driver-assistance systems (ADAS), which are electronics and software that reduce human errors. This includes various lane keeping assist systems, automatic emergency braking systems that prevent collisions, and signals that warn or guide the driver. News in recent years suggests that fully self-driving cars are still many years away. This increases the demand for ADAS systems.

Veoneer has won several “design wins,” similar to SmartEye. Both companies are well-positioned to benefit from the growing demand for automotive safety technologies. Handelsbank estimates Veoneer’s order book at USD 13.5 billion, which promises strong growth for many years to come, considering that this year’s revenue level is about USD 1.3 billion.

However, the company is priced more like a traditional automotive subcontractor than a growing technology company. Currently, EV/sales 2020e is 1.0. This year, revenue will decrease due to business divestments and the coronavirus crisis, but from next year onwards, growth is expected to be well over 20% per year. Handelsbanken’s analysts give a DCF value of USD 49 per share. The company is still unprofitable, but at the turn of the year, it had 699 million in cash, and according to management, the cash is sufficient to implement the company’s strategy.

During the summer, Veoneer announced a cooperation agreement with Qualcomm. Based on this cooperation, Handelsbanken’s analysts believe Veoneer will compete on equal terms with Intel and MobilEye. The fact that Qualcomm chose Veoneer as its partner validates the company’s position and technology.

I see this as an attractive opportunity to get involved in a growing technology company with a very moderate valuation.

Here you can find the company’s company preset and other additional information:

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Thanks to Mikko for the interesting opening. I’m already invested in Qt and Smart Eye, and there are indeed many similarities in terms of business model, so this might end up in my portfolio.

The company is dual-listed on NYSE. Can someone tell me if, besides exchange rates, it matters for a Finnish investor whether to buy through the Stockholm or New York exchange?

P.S. My forum virginity was broken with this post. I’ve been actively following for a couple of years though.

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SEB raised Veoneer to a Buy recommendation and increased the base case target price to SEK 264 (the closing price on Friday was SEK 153.5). SEB emphasizes the Qualcomm collaboration I just mentioned and the competitive advantage it brings. SEB’s bull case, on the other hand, reaches SEK 582.

Otherwise, I cannot comment on the marketplace question, except that in terms of trading costs, the Stockholm stock exchange is probably a more affordable place to trade.

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Has anyone found any analysis or a report on Veoneer that could be linked or shared as a PDF in this thread? Interesting company.

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Thanks @Mikko_Kiesilainen for a high-quality opening post! However, the following comment of yours caught my eye:

a) Do you see any single trigger that could cause the (partial) unwinding of the undervaluation, or would it happen “just” gradually as the story progresses and new investors discover the company?

b) Why do you think Veoneer should be priced as a growing technology company? Of course, it manufactures high-tech products, but its customers are very cost-conscious and capable of pushing prices down. In my opinion, this justifies lower multiples than, for example, software companies like Microsoft, Salesforce, ServiceNow, etc.

My intention is by no means to dump the company, but I do want to somewhat oppose and challenge.

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This and another thread recently started by Mikko (Ambu) don’t seem to be under the “Osakkeet” (Stocks) heading on the Forum. Should they be moved there so they don’t get overlooked by forum members who only follow the Stocks section? I assume there are some like that.

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Thanks for the questions!
a) I believe that undervaluation has now started to unravel, and this is accelerated by analyses such as today’s SEB report.

b) The valuation multiples will probably not reach the same levels as the Microsoft or Salesforce you mentioned, but EV/sales multiples of 4-5x could be very well justified if one believes that revenue growth will be 20-25% for the next five years. This growth profile distinguishes the company from conventional automotive industry subcontractors.

This was also Gardell’s Cevian’s idea when Cevian acquired an ownership stake in Autoliv and started supporting the spin-off of Veoneer from Autoliv. As part of Autoliv, Veoneer did not have the opportunity to receive the valuation it deserved.

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Thanks for your attention. I’m a new forum member and didn’t notice this feature. It’s fixed now.

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No problem, I’m also on my first day (as an active) forum member.

In the Privata affärer article linked by Mikko, reference is made to an SEB report, stating, among other things, that it’s too early to say much about the benefits of the Qualcomm collaboration, but in any case, the advantages for Veoneer include market growth and a decrease in the threat posed by new players in the industry. And a 132% increase in the target price in one go is exceptional. And the Bull case share price already makes one’s mouth water. Let’s keep expectations realistic, of course, but I think I’ll snag a small slice for my portfolio this Thursday on payday.

I’d be interested to hear @Aston_Livingstone’s views on this company.

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SEB’s analysis is not available, but DNB has freely available analyses of Veoneer.
You can find their Veoneer reports on the company pages (link to pages)

The latest DNB Veoneer update from 24.09.2020, a quite short analysis (Buy 160 SEK):
“We have, however, raised our target price to SEK160 (155) and still identify a significant re-rating opportunity for 2021e as key model launches ramp up to reignite the organic growth story.”
https://www.dnb.no/seg-fundamental/fundamentalweb/inst/GetReport.aspx?file=CMPM_162689.pdf

Handelsbanken: Analyst’s brief comments on Veoneer:
─ 16.9.2020: http://newsletter.handelsbanken.se/article/424A5C457043425A4078474A5A4B71/27297291/6275485
(Qualcomm cooperation could increase sales and market share, as Qualcomm has a strong position in the automotive infotainment market + long relationships with major vehicle manufacturers…)
─ 28.8.2020: http://newsletter.handelsbanken.se/article/424A5C457043425A4078474A5A4B71/27175231/6250385

For ABGSC, Berenberg and Kepler, only target prices are available:

  • ABG Sundal Collier, update 08.10.2020: Buy; 220 SEK
  • Berenberg 6.10.2020: Berenberg analyst Michael Filatov initiated coverage of Veoneer with a Hold rating and $15 price target. With vehicles undergoing “a generational shift,” Filatov believes this change will drive a greater share of high-value content to suppliers that can enable safer, cleaner and more connected vehicles, he tells investors.
  • Kepler target price found on Swedbank’s website: Hold $11: www.swedbank-aktiellt.se/om/veoneer
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Products resulting from the Qualcomm collaboration are expected to go into production in 2023 or early 2024. This supports growth prospects, even if it doesn’t immediately show in revenue. However, it says a lot that Qualcomm has chosen Veoneer as its partner. Qualcomm is at the cutting edge of the electronics and semiconductor industry and only accepts companies that produce the best software as partners.

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It seems the automotive industry is making a turn. Many analysts are also waking up to Veoneer. Yesterday, Mizuho analyst Vijay Rakesh raised the target price from $20 to $25, which, quickly calculated, is about 222 kronor, and the recommendation is buy (potential 38%). I understand that Japanese Mizuho is heavily invested in tracking the automotive and chip industries.

I also grabbed a bit of Veoneer to go with Smart Eye.

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Veoneer’s Q3 results are out today, apparently at 1 PM Finnish time. They’ve compiled a consensus estimate themselves from the forecasts of analysts who regularly follow the company.

https://www.veoneer.com/en/consensus-estimates

This is a quiet board, but hopefully someone can watch the broadcast and comment. If the presentation is in Swedish, I don’t have the skills to follow it.

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The Q3 2020 report seems to have been largely in line with market expectations.
Revenue of $371 million exceeded the consensus forecast of $355 million. The recovery from the Q2 slump appears to be rapid, as Q2 revenue was only $184 million.

Models coming to the market this year will bring significant revenue growth from 2021 onwards.

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Looks good :slight_smile:

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Veoneer was awarded Fiat Chrysler Automobiles’ (FCA) Supplier of the Year trophy. So Veoneer doesn’t really manufacture anything that’s subpar.

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Quite a bit of skiing down has already happened before the market dip. Is it a healthy unraveling of overvaluation, or did the earnings report not please? The 4H MA 200 is apparently a support level, though. Wiser folks could comment.

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The reception of the interim report among analysts appears to have leaned more towards the positive side. Target prices have seen more increases than decreases. However, the share price had already outpaced the recommendations. Nevertheless, growth prospects seem good.

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A little sugar in the tank. I still like buying trousers in the closet.
https://www.avanza.se/placera/telegram/2020/10/28/veoneer-credit-suisse-sanker-veoneer-till-underperform-lang-vag-till-lonsamhet.html

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Your link highlights very well the risk of burning through cash and a potential new share issue.
The other side of the coin is that Veoneer’s product segment faces strong growth expectations. As I understand it, Veoneer is a technology leader. For example, a Mercedes Benz GLE equipped with gadgets manufactured by Veoneer won the best ratings for driving assistance systems in the Euro NCAP test (October 2020).

These technologies are becoming so significant that car purchasing decisions will increasingly depend on how good these systems are.

For example: a system monitors other traffic, pedestrians, and even animals, warning of danger or actively preventing a collision depending on the system. These systems are initially sold as optional extras for premium brands/models until they become mandatory in all cars. At the end, fully autonomous traffic looms.

Therefore, I am 100% sure that the sector is at the very beginning of exponential growth. This, of course, does not mean that Veoneer will be among the winners, but it looks good now.

As Mikko stated, analysts have also woken up. I snapped a screenshot from MarcetWatch’s website on October 13-20. The average target price from 23 analysts was $14.47 - hold.

Today, the average target price is $17.62 - hold. In two and a half weeks, there has been a 21.8% increase. Of course, the target price is not yet very high, but the direction and pace are correct.
(The stock name seems to be missing from the image)

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Veoneer on a roll.

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