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Morgan Stanley analyst Adam Jonas initiated coverage on Phinia Inc (NYSE:PHIN) with an Overweight rating and a price target of $50.
The analyst says that they believe Phinia is the purest expression of thier ‘ICE is Nice’ thesis, which can generate substantial cash flows for longer than the market anticipates at ~4x EBITDA.
Jonas writes that although EV pessimism is in full swing, he still sees room for longer-term expectations to reset amid underappreciated geopolitical, environmental, and economic challenges in the current EV market.
Jones says that the company has a stable top-line, above-peer margins and minimal leverage and thus forecasts $200 million+ of free cash flow beginning in 2025 (>90% FCF conversion), the majority of which will be paid out in dividends + buybacks.
The analyst forecasts a faster 3% CAGR in EBITDA, 10% CAGR in cash flow, low China exposure (14% of sales), ~1x net leverage for the company. The analyst also estimates EPS of $4.10 in FY24, $4.75 in FY25, and $5.30 in FY26.
Price Action: PHIN shares are trading higher by 1.46% at $36.42 on the last check Tuesday.
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Posted In: PHIN
