Intrinsic Value Schaeffler AG (SHAF.SW)

• Previous Close: CHF7.28
• Intrinsic Value: n/a
• Upside potential: n/a%

Stock Valuation Context

Business Model And Market Position

Schaeffler AG is a leading global manufacturer of precision components and systems for automotive and industrial applications, operating across Europe, the Americas, China, and the Asia-Pacific region. The company’s diversified revenue model is anchored in three key divisions: Automotive OEM, Automotive Aftermarket, and Industrial. The Automotive OEM division supplies critical components for engine, transmission, chassis, and hybrid/electrical drive systems, catering to major automakers. The Automotive Aftermarket division provides repair solutions and services for a broad range of vehicles, ensuring recurring revenue streams. The Industrial division serves sectors such as energy, aerospace, and production machinery, reinforcing Schaeffler’s resilience against cyclical downturns. With a strong emphasis on innovation, Schaeffler maintains a competitive edge through strategic partnerships, such as its collaboration with Fraunhofer-Gesellschaft, and a robust R&D pipeline. The company’s market position is bolstered by its deep technical expertise, global supply chain, and long-standing relationships with tier-1 automotive and industrial clients. Schaeffler’s ability to adapt to electrification trends and sustainability demands further solidifies its role as a key player in the evolving mobility and industrial landscapes.

Revenue Profitability And Efficiency

In FY 2023, Schaeffler reported revenue of CHF 16.31 billion, reflecting its scale in the automotive and industrial sectors. Net income stood at CHF 310 million, with diluted EPS of CHF 0.47, indicating moderate profitability amid industry headwinds. Operating cash flow was robust at CHF 1.35 billion, though capital expenditures of CHF 938 million highlight significant reinvestment needs. The company’s ability to generate cash despite high capex underscores operational efficiency.

Earnings Power And Capital Efficiency

Schaeffler’s earnings power is tempered by cyclical demand and competitive pressures, as seen in its net margin of approximately 1.9%. The company’s capital efficiency is challenged by high debt levels (CHF 4.19 billion) relative to cash reserves (CHF 511 million), though its operating cash flow provides a buffer. The diluted EPS of CHF 0.47 suggests modest returns for equity holders.

Balance Sheet And Financial Health

Schaeffler’s balance sheet shows total debt of CHF 4.19 billion against cash and equivalents of CHF 511 million, indicating leveraged financial health. The company’s market capitalization of CHF 3.5 billion and beta of 1.365 reflect investor perception of moderate risk. While debt levels are elevated, strong operating cash flow (CHF 1.35 billion) supports liquidity and debt servicing capabilities.

Growth Trends And Dividend Policy

Schaeffler’s growth is tied to automotive and industrial demand, with electrification and sustainability trends offering long-term opportunities. The company paid a dividend of CHF 0.44 per share in FY 2023, signaling a commitment to shareholder returns despite modest earnings. Future growth will depend on its ability to innovate and capitalize on hybrid and electric vehicle adoption.

Valuation And Market Expectations

With a market cap of CHF 3.5 billion and revenue of CHF 16.31 billion, Schaeffler trades at a low revenue multiple, reflecting investor caution around cyclical risks. The beta of 1.365 suggests higher volatility compared to the market, aligning with its exposure to automotive and industrial cycles. Valuation metrics indicate subdued expectations for near-term earnings expansion.

Strategic Advantages And Outlook

Schaeffler’s strategic advantages include its technical expertise, global footprint, and strong OEM relationships. The company is well-positioned to benefit from electrification and industrial automation trends, though macroeconomic uncertainties and high debt remain challenges. Its partnership with Fraunhofer-Gesellschaft and focus on R&D could drive future innovation, but execution risks persist in a competitive landscape.

Sources

Company filings, Bloomberg