Stock Analysis & Valuation Schaeffler AG (SHAF.SW)

• Previous Close: CHF7.28
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, CHF	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)		n/a
Graham-Dodd Method		n/a
Graham Formula	4.90	-33

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 such as mobility, energy, aerospace, and production machinery. With a strong presence in Europe, the Americas, China, and the Asia-Pacific region, 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 and technological advancement. Schaeffler's diversified product portfolio and global footprint position it well to capitalize on trends like electrification and automation in the automotive and industrial sectors.

Investment Summary

Schaeffler AG presents a mixed investment case. On the positive side, the company benefits from its strong position in the automotive supply chain, particularly in precision components for both traditional and electric vehicles. Its diversified revenue streams across OEM, aftermarket, and industrial segments provide stability. However, the company operates in a highly competitive industry with thin margins, as evidenced by its modest net income of CHF 310 million on CHF 16.3 billion in revenue. The high total debt of CHF 4.19 billion against cash reserves of CHF 511 million raises some financial flexibility concerns. Schaeffler's beta of 1.365 suggests higher volatility than the market, which may deter risk-averse investors. The dividend yield appears reasonable but not exceptional. Investors should weigh Schaeffler's technological expertise and market position against the cyclical nature of the automotive industry and potential supply chain challenges.

Competitive Analysis

Schaeffler AG competes in the highly competitive automotive components sector, where it differentiates itself through precision engineering and a comprehensive product portfolio. The company's competitive advantage lies in its deep expertise in bearing technology and systems integration, particularly for demanding automotive applications. Schaeffler's strategic focus on electrification components (like hybrid modules and e-axles) positions it well for industry transformation. However, the company faces intense competition from larger, more diversified suppliers and lower-cost producers. Schaeffler's mid-size scale (CHF 16.3 billion revenue) means it lacks the R&D budget of some mega-suppliers but can be more nimble in specialized niches. The company's German engineering heritage commands premium positioning for precision components but may face cost pressure against Asian competitors. Schaeffler's aftermarket business provides stable cash flows that help offset cyclical OEM demand. The company's partnership with Fraunhofer-Gesellschaft enhances its innovation capabilities but requires continued investment to maintain technological leadership. Schaeffler's vertical integration provides quality control benefits but may limit flexibility in some market segments.

Major Competitors

• Continental AG (CON.DE): Continental is significantly larger than Schaeffler with broader automotive systems expertise including tires, autonomous driving, and vehicle networking. While Continental has greater scale and R&D resources, it lacks Schaeffler's focus on precision mechanical components. Continental's recent restructuring indicates challenges in maintaining profitability across its diverse operations.
• Zurich Insurance Group AG (ZURN.SW): Note: This appears to be an incorrect competitor entry as Zurich is an insurance company. A proper automotive competitor would be:
• Robert Bosch GmbH (BOS.DE): The world's largest automotive supplier with complete systems capabilities. Bosch's massive scale and electrification investments pose significant competition, particularly in electric drive components. However, as a private company, Bosch can make longer-term investments without quarterly earnings pressure. Schaeffler competes by offering more specialized mechanical solutions.
• NTN Corporation (NTN.T): A major bearing manufacturer with strong Asian presence. NTN competes directly in wheel bearings and industrial applications. While NTN has cost advantages in Asian markets, Schaeffler maintains technology leadership in high-performance automotive bearings and systems integration.
• SKF AB (SKF-B.ST): The world's largest bearing manufacturer with strong industrial focus. SKF's greater scale provides purchasing advantages, but Schaeffler has deeper automotive OEM relationships and more advanced solutions for electrified drivetrains. SKF's stronger balance sheet gives it more financial flexibility.
• Dana Incorporated (DAN): Specializes in drivetrain and electrification components. Dana is particularly strong in North American commercial vehicles while Schaeffler has greater European passenger car presence. Both companies are investing heavily in electrification, creating increasing competition in e-drive systems.