top of page
Search

Hexcel (HXL): Visible growth with margin inflection

  • Writer: Abacus Research
    Abacus Research
  • Mar 4, 2019
  • 1 min read

Hexcel is an attractive, high ROIC business with limited competition and strong underlying organic growth trends. 

  • Near term, it is all about margin expansion and incremental margins rebounding. We expect incremental margins of 2019 onwards to surprise the market after a disappointing 2018, which had a number of headwinds.

  • We like the secular increasing penetration of composite materials in Aerospace. The latest planes A350 and B787 have shown the way with 50% composite content. High volume planes are still at ~10% composite content. We believe there is plenty of room for increasing content growth, but it does not happen linearly.

  • We expect HXL to grow at 7-9%pa organically for the foreseeable future as content in aerospace continues to growCyclical aspect of growth looks ok for now, although our ability to notice / our record in discounting cyclical turning points is poor.

Potential Upside: $90 (+25%): DCF based, 2020 revenue assumption 5.7% above consensus.

Sensible Downside: $62 (-13%): Barring a recession, downside looks limited to us.


 
 
 

Recent Posts

See All
Axon:

Axon is shifting from selling individual tools to providing an interconnected ecosystem. Hardware like TASERs and cameras now act as "data generators" that feed directly into high-margin software modu

 
 
 
C.H. Robinson

CHRW has been going through significant change, They are retaking market share. The new CEO has transformed the company by bringing in a lean / AI, that has helped CHRW to grow earnings despite strugg

 
 
 
Brookfield (BN):

We initially wrote up BN in Jan 2024, it has increased 70%, so why mention it again? Firstly, we think the fundamentals are as good now as they were 2 yrs ago, with a >15% IRR on offer. BN is not a we

 
 
 

Comments

bottom of page