Stock Analysis & Valuation Schaeffler AG (SHA.DE)

• Previous Close: €4.58
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)		n/a
Graham-Dodd Method		n/a
Graham Formula	5.21	14

Strategic Investment Analysis

Company Overview

Schaeffler AG is a leading global manufacturer of precision components and systems for automotive and industrial applications. Headquartered in Herzogenaurach, Germany, the company operates through three key divisions: Automotive OEM, Automotive Aftermarket, and Industrial. Schaeffler's Automotive OEM division specializes in engine, transmission, chassis, and hybrid/electrical drive systems, supplying cutting-edge solutions to automakers worldwide. The Automotive Aftermarket division provides repair solutions for various vehicle types, while the Industrial division serves sectors like mobility, energy, aerospace, and production machinery. With a strong presence in Europe, the Americas, China, and Asia Pacific, Schaeffler has established itself as a critical player in the automotive supply chain. The company's strategic partnership with Fraunhofer-Gesellschaft underscores its commitment to innovation in mobility solutions. Schaeffler's expertise in rolling bearings, hybrid modules, and electromechanical systems positions it well for the evolving automotive industry, particularly in the transition toward electrification and sustainable mobility.

Investment Summary

Schaeffler AG presents a mixed investment case. On the positive side, the company benefits from its strong position in automotive components, particularly in hybrid and electric vehicle systems, which aligns with global electrification trends. Its diversified revenue streams across OEM, aftermarket, and industrial segments provide stability. However, investors should note the company's relatively high beta (1.353), indicating above-average volatility compared to the market. While Schaeffler generated €16.3 billion in revenue for FY2023, its net income of €310 million and diluted EPS of €0.46 reflect modest profitability. The company maintains a reasonable dividend yield with a €0.45 per share payout. Key risks include exposure to cyclical automotive demand, high total debt (€4.19 billion), and intense competition in the auto parts sector. The capital-intensive nature of the business is evident in substantial capital expenditures (€938 million).

Competitive Analysis

Schaeffler AG competes in the highly competitive global automotive components market, where its main advantages include technological expertise in precision components and a strong position in bearing systems. The company's deep engineering capabilities, particularly in hybrid and electric drivetrain components, provide a competitive edge as the industry shifts toward electrification. Schaeffler's vertical integration allows for quality control and cost efficiencies in manufacturing complex components. Its strategic partnership with Fraunhofer-Gesellschaft enhances its R&D capabilities in future mobility solutions. However, the company faces intense competition from larger, more diversified automotive suppliers that may have greater scale advantages. Schaeffler's focus on precision components rather than complete systems could limit its bargaining power with OEMs compared to full-system suppliers. The company's aftermarket business provides stable cash flows but operates in a crowded segment with strong price competition. In the industrial segment, Schaeffler must compete with specialized bearing manufacturers and broad-line industrial suppliers. The company's German base provides engineering credibility but may result in higher cost structures compared to Asian competitors. Schaeffler's ability to maintain technological leadership while controlling costs will be crucial for its competitive positioning going forward.

Major Competitors

• NSK Ltd. (NSKYY): NSK is a major Japanese competitor in precision bearings and automotive components. The company has strong technological capabilities similar to Schaeffler but benefits from lower cost structures in Asia. NSK has been expanding its electric vehicle component business, directly competing with Schaeffler's hybrid systems. However, NSK has less presence in European automotive OEMs compared to Schaeffler.
• NTN Corporation (NTNYY): NTN is another Japanese bearing manufacturer competing with Schaeffler in both automotive and industrial markets. The company has particular strength in wheel bearing units, challenging Schaeffler's chassis systems business. NTN has been slower than Schaeffler in developing electrification solutions but benefits from strong relationships with Japanese automakers.
• SKF AB (SKFRY): SKF is Schaeffler's closest European competitor in bearing technology. The Swedish company has a more diversified industrial customer base but less automotive OEM penetration than Schaeffler. SKF has strong brand recognition in aftermarket bearings and has been investing heavily in condition monitoring technologies, an area where Schaeffler is also active.
• Dana Incorporated (DAN): Dana competes with Schaeffler in drivetrain and propulsion systems, particularly in the electrification space. The American company has stronger presence in commercial vehicles and off-highway equipment. Dana's larger scale in North America provides advantages in that market, but it lacks Schaeffler's depth in precision bearing technology.
• GKN Automotive Limited (GKN.L): GKN Automotive, now part of Melrose Industries, is a direct competitor in driveline systems and eDrive technologies. The company has particularly strong capabilities in all-wheel-drive systems and is aggressively pursuing electric axle development. GKN's ownership structure following the Melrose acquisition creates some uncertainty compared to Schaeffler's more stable corporate structure.