MDA Ltd.
Highlights from the RBC Canadian Automotive, Industrials & Transportation Conference
TSX: MDA | CAD 7.87 | Outperform | Price Target CAD 12.00
Sentiment: Neutral
This morning, Mike Greenley, Chief Executive Officer and Vito Culmone, Chief Financial Officer presented during day three of RBC's Canadian Automotive, Industrials & Transportation Conference. The company provided a bullish view on the broader space market, and highlighted its position in the space communication, earth observation and exploration sub-markets. We believe the space market is seeing a continued surge with both government customers (national security and other civil agencies) as well as with commercial companies, and MDA is well positioned as a merchant supplier of critical components and systems, such as antennas.
The company highlighted its strong 1Q23 performance, and sounded very confident in its 2023 outlook. For the $750M-$800M 2023 revenue guidance, the company has ~85% of these revenues currently in its backlog, and is confident that the other ~15% will come from existing contracts and utilization. The company sounded cautious on near-term bookings, but expects to see an uptick in contract announcements in 2H23 and into 2024. The company called out opportunities with commercial companies (VW, John Deere as part of 4-6 potential LEO communication opportunities) that could build off its current work with Globalstar, but also with government customers. The company highlighted the work it is doing with the U.S. space force and its space layer contractors as these efforts accelerate.
Execution is the focus for 2023. The company is focused on executing on its current backlog, as well as on new potential contract awards. The strong 1Q23 margins benefited from strong execution on contract timing and supply chain, but also from greater utilization across the facilities. The company is well positioned to exceed its 2023 margin guidance, and we expect an update to the full year outlook with the 2Q23 results. The CHORUS program should drive spending initially on ground system upgrades, and the company is optimistic that customer demand for the services will be strong. We believe the stock is well positioned to continue to benefit from the strong execution, the scarcity value around quality space companies, and the potential upside from incremental contract awards.