Inbox: Für RCB ist Polytec jetzt eine Kaufempfehlung

We have raised our 2017-19e EPS forecasts by 23% on average, increase the target price to EUR 19.5 from EUR 15.5 and consequently upgrade Polytec to BUY from HOLD. 2Q results were good, fully in line with RCBe, with a 9.1% EBIT margin being the main highlight. Having gained more confidence in Polytecs earnings potential coupled with the recent share price correction we again see compelling value in the stock. We think that the main items that drove the profitability improvement over the last two years (lean management programme, relocation of production from DE to CZ, Ebensee turnaround) should provide greater earnings support also in the next years. Undoubtedly the recent news-flow in the auto industry (e.g. cartel accusations of German OEMs, discussions around driving ban of certain diesel cars) was negative, but importantly the company, claiming good visibility, has no indication of a change in the call-off pattern by its customers so far. We acknowledge that the automotive cycle could be at a relatively advanced stage but were also left with the impression that Polytec is confident to compensate a potential demand slowdown via new nominations and market share gains. Trading at 2017-18e P/Es of 8.0x and 8.4x, respectively, we regard some market uncertainty as priced in. Our target price translates into a P/E of 10x (still a clear double-digit discount vs. peers). The dividend yield of 3% also looks reasonably attractive and is well above the sector median.