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Bombardier Inc. T.BBD.A

Alternate Symbol(s):  BDRPF | T.BBD.PR.B | BDRXF | T.BBD.PR.C | T.BBD.PR.D | BOMBF | BDRAF | T.BBD.B | BDRBF

Bombardier Inc. is a Canada-based manufacturer of business aircraft with a global network of service centers. The Company is focused on designing, manufacturing and servicing business jets. The Company has a worldwide fleet of more than 5,000 aircraft in service with a variety of multinational corporations, charter and fractional ownership providers, governments and private individuals. It operates aerostructure, assembly and completion facilities in Canada, the United States and Mexico. Its robust customer support network services the Learjet, Challenger and Global families of aircraft, and includes facilities in strategic locations in the United States and Canada, as well as in the United Kingdom, Germany, France, Switzerland, Austria, the United Arab Emirates, Singapore, China and Australia. The Company's jets include Challenger 350, Challenger 3500, Challenger 650, Global 5500, Global 6500, Global 7500 and Global 8000.


TSX:BBD.A - Post by User

Post by lb1temporaryon Mar 24, 2023 8:12am
602 Views
Post# 35358102

Desjardins : Target to 99$ (potential for 191$ !!!)

Desjardins : Target to 99$ (potential for 191$ !!!)Investor day recap—still plenty of untapped potential

The Desjardins Takeaway


Yesterday, BBD raised its 2025 financial targets in connection with its 2023 virtual
investor day. We are pleased by the updated targets given the stronger-than-expected
FCF, revenue, delivery targets and the absence of a plan to develop a clean-sheet design
before the balance sheet has fully recovered (less capital-intensive, more favourable to
creditors and less risky). We remain bullish and recommend investors revisit the story.

Highlights

BBD now targeting 150 deliveries in 2025. Management’s target assumes aircraft sales
of >US$7b and ~150 deliveries in 2025. This target could be increased again as BBD has
the capacity to flex up to 200 aircraft/year.

2025 adjusted EBITDA margin target decreased to ~18% from ~20%—not a cause
for concern. We do not view the decrease in margin outlook as an overly bearish
indicator given management maintained its aftermarket target, which decreased its mix
contribution to 22% (from 27%) of total 2025 revenue. Looking at the industry, an 18%
adjusted EBITDA margin would still position BBD at the higher end of the spectrum.

FCF of US$900m+ and leverage of 2.0–2.5x a key driver—leverage target likely
conservative. We derive 1.6x, which should drive an investment-grade rating, driving
significant benefits to Bombardier, such as better cost of capital, improved access to
liquidity and opening the company to a larger pool of potential investors.
Lower leverage will provide BBD with optionality for several capital-deployment
opportunities post-2025. (1) Reinvesting in existing operations, (2) launching a new
clean-sheet or derivative aircraft, (3) tuck-in M&A, or (4) shareholder returns.

Valuation

Adjusting our forecast and increasing our target to C$99 (from C$97) to account for
the change in FX rates. Our target is based on an EV/EBITDA multiple of 8x on our 2024
EBITDA forecast of US$1,331m. We have adjusted our exchange rate assumption to C
$1.37/US$1 (from C$1.34/US$1).

Recommendation

Reiterating our bullish stance. The update gave us further confidence in management’s
ability to meet (and potentially surpass) its 2025 targets. We believe the stock could be
worth C$191 in 2025 using a 10x EV/EBITDA multiple if management delivers on these
objectives


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