TSX:ATS - Post Discussion
Post by
retiredcf on May 19, 2023 9:00am
TD Join the Party
Raise their target by $9.00 to $72.00. GLTA
ATS Corporation
(ATS-T) C$61.43
Q4/F23 EBITDA Beat; Backlog Up Marginally to a New Record Event
ATS reported Q4/F23 adjusted EBITDA of $103mm, an ~5% beat vs. the Street/ TDSI at $99mm/$98mm. Relative to our forecast, the beat was driven by a faster- than-expected backlog drawdown, of which ATS attributed ~50% to better-than- expected program execution.
Impact: SLIGHTLY POSITIVE
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Q4/F23 Results: Revenue increased 21% y/y to a record $731mm, reflecting healthy organic growth of 17%, plus acquired revenue/an FX tailwind. Excluding the mark-to-market component of stock-based compensation, as ATS is now doing, adjusted EBITDA increased 25% y/y to $118mm (16.2% margin) vs. $95mm (15.7% margin) in Q4/F22.
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Solid Bookings/Record Backlog: Bookings of $737mm, although down vs. the record $979mm in Q3/F23, were still up a healthy 16% y/y, and included a US $120mm EV order from an existing customer. The book-to-bill ratio was 1.01 (1.26 on a TTM basis) and the ending backlog of $2,153mm was up 50% y/y and relatively stable q/q. The company's outlook commentary is virtually unchanged vs. last quarter. Funnel activity is strong in life sciences, EVs, and in food and beverage, and ATS has a record backlog in food and beverage. Activity is stable in consumer products and nuclear, and the nuclear funnel includes some long- term opportunities. ATS is seeing some supply-chain improvements, including lower raw-material costs, but is planning for continued price volatility, inflationary pressure, and longer lead times for F2024, particularly with respect to electrical and mechanical parts.
TD Investment Conclusion
We have rolled forward our target price horizon by one quarter and increased our EV/ EBITDA valuation multiple to 14.5x from 13.0x, which is where the stock is currently trading based on our F2024E EBITDA estimate. We recognize that ATS will start to lap more difficult prior-year bookings comparables in F2024, particularly in Q2/ F24-Q3/F24, but we are encouraged by the company's recent wins in assembly systems for auto-injectors (e.g., weight-loss drugs) and in pilot production lines for a couple of new EV customers, which we believe create upside potential vs. our current financial forecasts. We also anticipate that ATS will reschedule its New York Investor Day for early fall, which we see as a likely positive share-price catalyst.
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