BorgWarner Inc. BWA recently announced that it has entered into an Equity Transfer Agreement with Hubei Surpass Sun Electric (“SSE”). Per the deal, BorgWarner will acquire the Electric Vehicle Solution, Smart Grid and Smart Energy businesses of SSE. The transaction will have an enterprise value of nearly RMB 410 million, of which around RMB 267 million would be delivered at or soon after closing. It allows contingent payments of about RMB 143 million over a rough span of two years following the closing.
The transaction is subject to customary closing conditions and SSE shareholder approval and is expected to close in the first quarter of 2023.
Based in Hubei province in China, SSE’s electrification business offers patented EV charging solutions to customers in China and more than 70 other countries. SSE has an excellent track record of delivering over 50,000 charging points and leading the engineering, procurement and construction of more than 250 charging station sites.
BorgWarner is focused on expediting its fast-charging capabilities worldwide, so the recent development will be an added advantage for the company. BorgWarner’s strength in Europe and North America will complement SSE’s electrification efforts in China.
BorgWarner’s ambitious Charging Forward project, announced last year to accelerate its electrification strategy, bodes well. Riding on soaring EV popularity, BorgWarner’s 2022 electrification revenues are expected to increase to above $850 million, more than doubling from 2021 levels. SSE, with its electrification potential, will support BorgWarner’s Charging Forward strategy as well.
BorgWarner, through its strategic acquisitions, ensure solid growth prospects. The acquisition of AKASOL, completed in February 2022, has expanded its commercial vehicle electrification capabilities and is set to aid the top-line growth. For full-year 2022, BorgWarner anticipates net sales within $15.5-$16 billion, indicating an increase from $14.8 billion generated in 2021
The buyout of Santroll’s light vehicle eMotor business, which closed in March 2022, has further bolstered BorgWarner’s scale in eMotor product leadership and enhanced manufacturing capabilities. The company expects the Santroll acquisition to drive around $300 million of revenues by 2025, inclusive of assumed revenue synergies. The buyout of Rhombus Energy, completed in August 2022, complements BorgWarner’s existing European charging footprint and expands the firm’s portfolio in North America. The acquisitions of Santroll’s light vehicle eMotor business and Rhombus are expected to increase year-over-year sales by $45-$55 million in 2022.
In another noteworthy development, BorgWarner presented its electric commercial vehicle (eCV) electrification portfolio at the IAA Transportation 2022, currently being held in Germany.
BorgWarner displayed a series of new solutions comprising the high-energy flat battery system, which features a new flat module architecture suitable for electrified lightweight commercial vehicles and buses. Also, its new modular high-voltage eFan system will ensure the highest efficiency and lowest noise. With a robust design, the system will score high on reliability and function under extreme conditions.
BorgWarner’s industry-leading components and eCV portfolio demonstrate careful research and a conscious attempt to evolve to cleaner and more efficient energy sources. To pivot to a more sustainable future, the company is constantly upgrading and customizing its eCV solutions for use in light-, medium- and heavy-duty trucks and off-highway applications.
Shares of BorgWarner have lost 20.8% over the past year compared with its industry’s decline of 43.1%.
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Zacks Rank & Key Picks
BWA carries a Zacks Rank #3 (Hold) currently.
Some better-ranked players in the auto space are Yamaha Motor Co. YAMHF, sporting a Zacks Rank #1 (Strong Buy), and LCI Industries LCII and Genuine Parts Company GPC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Yamaha has an expected earnings growth rate of 1% for 2023. The Zacks Consensus Estimate for current-year earnings has been revised 11.6% upward in the past 30 days.
Yamaha’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. YAMHF pulled off a trailing four-quarter earnings surprise of 47.95%, on average. The stock has declined 30% over the past year.
LCI Industries has an expected earnings growth rate of 68.1% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.
LCI Industries’ earnings beat the Zacks Consensus Estimate in all the trailing four quarters. LCII pulled off a trailing four-quarter earnings surprise of 26.48%, on average. The stock has declined 15.7% in the past year.
Genuine Parts has an expected earnings growth rate of 15.3% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.
Genuine Parts’ earnings beat the Zacks Consensus Estimate in all the trailing four quarters. GPC pulled off a trailing four-quarter earnings surprise of 11.03%, on average. The stock has risen 25.5% in the past year.
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