Modine Manufacturing Corp (NYSE: MOD)

Gabelli Research Analyst Matthew Paige discuses Modine Manufacturing Corp (NYSE: MOD)

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Transcript:
Modine Manufacturing, headquartered in Racine, Wisconsin, designs, manufactures and distributes a range of thermal distribution products for a variety of end markets worldwide.

The company has 51 million shares outstanding, closed at 23 dollars per share for an equity market cap of 1.2 billion dollars.

After about 2 years of cost cutting and efficiency through a program branded as ‘Strengthen, Diversify and Grow,” the company is now benefiting from end market improvements that we expect to continue to power the stock forward. Most notably Brazil, a region that once saw revenue of close to $200 million as recently has 2011has seen its commercial vehicle market begin to recover and so too has Modine’s revenue in the region we believe bottomed below $50 million.

Another end market that is growing in important to Modine is Asia. As China and India begin to demand better emission controls, OEMs are looking to suppliers for help. One of Modine’s automotive products: radiators, typically sell at a premium to locally produced models, but weigh less, and utilize superior technology to mitigate their environmental impact. Additionally, increased infrastructure spending in the region has driven a surge in demand for excavators, a product that carries a high content, and rich mix for Modine.

Finally, you can’t talk about automotive emissions without bringing up electric vehicles. Modine already supplies the Tesla Model S with a battery chiller, which runs about $30 a unit. But, the company estimates a $300 per vehicle opportunity in EVs for thermal management devices after summing up battery temperature control components, and technology needed to heat and cool the cabin, which comes with unique challenges when compared to a traditional ICE vehicle.

As we expected, after delivering strong fiscal Q2 results, Modine recently raised its fiscal 2017 guidance for the FYE March 31.. We estimate EPS can grow from 80 cents in 2016 to 1.45 cents in 2017 and $1.55 in 2018, and calculate a 2018 Private Market Value estimate of 32 dollars per share.



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