EV Market Might Be Gloomy, But Morgan Stanley Says This Company Might Be a Cash Gushing Machine

Zinger Key Points
  • Morgan Stanley's Adam Jonas initiates coverage on Phinia with an Overweight rating and a price target of $50.
  • Jonas views Phinia as a prime example of their 'ICE is Nice' thesis, expecting substantial cash flows at around 4x EBITDA.

Morgan Stanley analyst Adam Jonas initiated coverage on Phinia Inc 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.

Photo via Shutterstock

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