ATS Corp T.ATS

Alternate Symbol(s): ATS

Industrials

ATS Corporation is an automation solutions provider. It uses its knowledge base and global capabilities in custom automation, repeat automation, automation products and value-added solutions, including pre-automation and after-sales services, to address the sophisticated manufacturing automation systems and service needs of multinational customers in markets, such as life sciences, transportation, food and beverage, consumer products, and energy. It engages with customers on both greenfield programs, such as equipping new factories, and brownfield programs, including capacity expansions, production relocations, equipment upgrades, software upgrades, efficiency improvements and factory optimizations. It offers post-automation services. It offers artificial intelligence and machine-learning-based tools for industrial production. It designs and manufactures automated water purification solutions. It also manufactures lab equipment for the life sciences and pharmaceutical industries.

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ATS Corp

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Post by retiredcfon Aug 31, 2023 11:00am

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Post# 35613779

TD

ATS Corporation

(ATS-T) C$59.48

Investor Day Preview Event

Recommendation: BUY

Risk: MEDIUM

12-Month Target Price: C$70.00

12-Month Dividend (Est.): C$0.00

12-Month Total Return: 17.7%

Market Data (C$)

ATS will host an Investor Day on Wednesday, September 6, in New York (registration). The event will also be accessible via webcast (registration).

Impact: NEUTRAL

Segment Deep Dives: We expect the event to feature ATS' senior leadership and profile the company's business segments in detail: life sciences, food & beverage, transportation, consumer, and energy. ATS has significantly expanded its total addressable market in life sciences since its September 2018 Investor Day, including through the acquisitions of Comecer and SP Industries. ATS has also since originated a platform in food & beverage, a market that shares many characteristics with life sciences (low cyclicality, regulated environment, quality is critical, etc.). ATS' transportation segment, which focuses on EV battery-pack assembly, has a substantial backlog with a high-quality customer, as the industry undergoes an EV transition that we see as just in its early stages.
Financial Targets: ATS has a 15% EBIT margin target, which is only ~150bps away. ATS' EBIT margin hit a recent high of ~14% in F2022, but has averaged ~13.4% over the TTM, reflecting longer lead times for key raw materials and the early stage of progress against the company's ~$850mm EV backlog (margins tend to improve as the work hits later milestones). We are not expecting ATS to introduce a new margin target; however, we believe that the Investor Day presentations will illustrate how supply-chain optimization, modularization/standardization, after-sales services growth, and the ABM can drive the business to 15% and beyond. We expect particular emphasis on the services opportunity (~20% of revenue), because ATS automates mission- critical processes where the value proposition of avoiding costly downtime through expert maintenance is strong. We also believe that ATS brings a unique, process-centric lens to help customers leverage factory data.

TD Investment Conclusion

We do not expect the Investor Day to provide a guidance-driven catalyst; however, we believe that the New York location should help broaden U.S. investor awareness of ATS (now dual-listed). We see ATS as uniquely positioned to benefit from supply-chain de-risking, with continued scope for margin improvement and M&A upside. We also believe that increased U.S. share ownership/research coverage raises the prospect of a higher valuation.