GICS Sector : Industrials
LEM Holding SA, together with its subsidiaries, provides solutions for measuring electrical parameters in China, the United States, Germany, Japan, Italy, Switzerland, and internationally.It operates in two segments, Industry and Automotive.The Industry segment develops, manufactures, and sells transducers for the measurement of current and voltage of various industrial applications.
LEM Holding S.A. reported a decline in sales by 5% to CHF 148 million for the first half of the year, with a gross margin drop to 40% from 44% in the same period last year, resulting in a gross profit of CHF 59 million, down 15%. The EBIT margin was 7.7%, with EBIT reaching CHF 11.4 million. The actual EPS came out at -0.16426, missing estimates significantly. The company's revenue decline was largely due to FX losses, but the segments growing and declining balanced each other out, with the Automation business growing slightly, Automotive seeing a 9% growth in constant currencies, and the Track business being the strongest with a 15% growth rate in constant currencies.
Publication Date: Nov -30
The company's operational expenditures were reduced under the Fit for Growth program, resulting in a 13% decline in SG&A spend. Despite the tough start to the year, Q2 saw improvements, with a gross margin of CHF 30 million, down 10% from Q2 last year. The company remains cautious, guiding a sales range of CHF 265 million to CHF 290 million and a high single-digit EBIT margin for the full year. As Frank Rehfeld stated, "the old goals of CHF 600 million in sales and an EBIT margin of 20% are not forgotten, but the timeline to achieve them may be longer than initially expected due to changing market realities and geopolitical decisions."
LEM Holding's current valuation metrics indicate a 'P/E Ratio' of 43.42, 'P/S Ratio' of 1.19, and 'EV/EBITDA' of 32.1. The 'ROIC' stands at 7.81%, and 'ROE' is 6.66%. The company's net debt decreased by CHF 5 million more than the cash flow statement implies, partly due to Forex lift from non-CHF liabilities. Analysts estimate next year's revenue growth at -10.6%, indicating a continued challenging environment. The company's guidance implies a need for strict cost discipline and financial resilience to navigate the current market conditions.
The company is progressing with its investment in integrated current sensing and TMR, with products being sampled to customers and receiving positive feedback. However, the launch is expected in 2026, with sales contribution expected to be slow until 2027. The Fit for Growth program is on track, with planned savings of CHF 18 million to CHF 22 million in '25-'26 and an additional CHF 15 million in the next financial year. No further restructuring is currently necessary, but it could be considered if the market develops differently.
Order levels were sequentially down in Q2, and while they're comparable year-over-year, the company is being cautious in capturing orders due to low visibility. Lead times are difficult to extrapolate from order levels, making it challenging to predict sales. The company's midterm growth target of 4% to 7% in local currencies implies that volumes need to increase more than prices decrease, indicating a challenging path ahead.
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Asia's growth is driven by increasing electrification, urbanization, and industrialization. Rising demand for renewable energy and infrastructure development fuels LEM Holding SA's growth. Government initiatives and investments in smart grids, electric vehicles, and renewable energy sources also contribute to the region's growth, with a 4% growth rate.
Strong demand for electrical components in the automotive and industrial sectors, driven by electrification and digitalization trends, contributes to LEM Holding SA's 6% growth in Europe and the Americas. Additionally, increasing adoption of renewable energy sources and investments in smart grid infrastructure further boost demand for LEM's products.
LEM's current transducers are designed to measure AC and DC currents in a wide range of applications, including industrial, transportation, and renewable energy systems.
LEM's voltage transducers are used to measure AC and DC voltages in various applications, including industrial, transportation, and renewable energy systems.
LEM's current sensors are designed to measure AC and DC currents in a wide range of applications, including industrial, transportation, and renewable energy systems.
LEM's voltage sensors are used to measure AC and DC voltages in various applications, including industrial, transportation, and renewable energy systems.
LEM's Rogowski coils are used to measure AC currents in high-frequency applications, including industrial, transportation, and renewable energy systems.
LEM's Hall effect sensors are used to measure magnetic fields in various applications, including industrial, transportation, and renewable energy systems.
The threat of substitutes for LEM Holding SA is moderate, as there are some alternative products available in the market, but they are not very close substitutes.
The bargaining power of customers for LEM Holding SA is low, as the company operates in a niche market with limited customer base.
The bargaining power of suppliers for LEM Holding SA is moderate, as the company relies on a few key suppliers for its components.
The threat of new entrants for LEM Holding SA is high, as the market is attractive and there are low barriers to entry.
The intensity of rivalry for LEM Holding SA is moderate, as there are a few key players in the market, but they are not very aggressive competitors.
| Value | |
|---|---|
| Debt Weight | 28.27% |
| Debt Cost | 3.95% |
| Equity Weight | 71.73% |
| Equity Cost | 7.96% |
| WACC | 6.83% |
| Leverage | 39.41% |
Value: 2.9
Growth: 8.1
Quality: 6.9
Yield: 1.2
Momentum: 9.0
Volatility: 4.3
1-Year Total Return ->
Value: 9.5
Growth: 2.8
Quality: 2.7
Yield: 3.8
Momentum: 1.0
Volatility: 7.7
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Value: 8.0
Growth: 4.2
Quality: 5.0
Yield: 0.0
Momentum: 9.0
Volatility: 0.3
1-Year Total Return ->
Value: 4.6
Growth: 6.9
Quality: 4.8
Yield: 1.2
Momentum: 6.5
Volatility: 2.3
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Value: 4.7
Growth: 3.4
Quality: 4.1
Yield: 3.8
Momentum: 1.0
Volatility: 4.0
1-Year Total Return ->
Value: 1.6
Growth: 1.4
Quality: 3.0
Yield: 3.1
Momentum: 0.0
Volatility: 2.3
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