Our view: We expect Exchange’s upcoming Investor Day to focus on the company's growth avenues - notably in its Window Solutions and Aerospace segments, both of which we view as well positioned for meaningful growth into 2024 and 2025. Key is that we believe Exchange's growth profile provides a solid long-term investment opportunity, not fully priced into the shares at current levels in our view.
Key points:
Investor Day. Exchange will host its Investor Day on October 10 and 11 in Concord, Ontario, and St. John’s, Newfoundland. During the event, hosted by Exchange's senior management, including CEO Mike Pyle, we will be touring BVGlazing and hearing from the company's President, Mike Cornacchia. We will also see PAL Aerospace and get an update from the company's senior management, including PAL's CEO Jake Trainor.
BVGlazing tour to highlight strategic opportunity. We expect Mr. Cornacchia's presentation to focus on the long-term opportunity surrounding apartment construction in Canada as well as the synergy benefits from closer alignment of BVGlazing and Quest. We also believe management will address near-term headwinds related to apartment construction starts, which are down in the US. Our view is that in the near- term this may delay conversion from quoting to backlog; but that longer- term the rental construction outlook remains solid reflecting population growth, especially in Canada, and elevated cost to own a home.
PAL Aerospace update to focus on recent business wins and future opportunity. Following our BVGlazing update next week, we will fly to St. John's to get an update from the PAL management team. We look forward to our update from PAL's CEO, Jake Trainor, who we hosted in Toronto in May at our Industrials Conference. We expect to get an update on PAL's new agreement with Air Canada, which we view as a solid driver of growth into next year. We will also look to Mr. Trainor for an update on PAL's longer- term strategy, especially with regard to recent business wins and future surveillance opportunities with the UK government.
Adjusting estimates. We are adjusting slightly higher our estimates following today's tuck-in acquisition of DryAir. Our 2023 EBITDA estimate increases to $571MM (from $568MM), our 2024E to $672MM (from $661MM), and our 2025E to $720MM (from $708MM). See Exhibit 1.
Price target decreases to $70 (from $71); maintain OP. We apply a blended 7.7x EV/ EBITDA multiple (8x for Aviation and 7x (from 7.5x) for Manufacturing) to our 2025 EBITDA estimate discounted back. Our blended multiple of 7.7x is ahead of current consensus NTM valuation of 6.1x as we see opportunity for a re-rate given EIF’s resiliency in the current macro backdrop as well as due to the company’s significant growth opportunity.