May 8, 2018

THRM – Although negative management sentiment suggests the potential for near-term headwinds, overly-bearish market expectations suggest longer-term upside remains warranted


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      • Gentherm Incorporated (THRM:USA)currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with an 11.8x Uniform P/E. At these levels, markets are pricing in bearish expectations for the firm, which, despite the potential for near-term headwinds given management’s negative sentiment, likely supports longer-term outperformance should THRM maintain profitability at current levels
      • Specifically, management may have concerns about their rear seat heating and cooling products in the Hyundai Genesis and the Kia ON, and may lack confidence in the sustainability of cost advantages in their system over other modules in the market. Furthermore, they may have concerns about Hyundai’s declining vehicle production in North America, and may lack confidence in the sustainability of Etratech growth going forward. That said, market expectations for Uniform ROA to decline to levels not seen since 2009 still appear too bearish. As such, multiple expansion and equity upside remain warranted in the long-term

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