![](\"https:\/\/static.wixstatic.com\/media\/b15e45_ee1fc7ca9d5a4fd4a12b8f9d4cc95f60~mv2.jpg\/v1\/fill\/w_946,h_552,al_c,q_85,usm_0.66_1.00_0.01\/b15e45_ee1fc7ca9d5a4fd4a12b8f9d4cc95f60~mv2.jpg\")
<\/em><\/strong><\/p>\nHere, I’ll cover “Auto Partner SA”, a Polish auto parts distributor that is a fast grower, trades at attractive valuations, and should reap considerable gains for investors even in conservative profitability outlooks. Founded in 1993, Auto Partner’s business focuses on selling auto parts for engines, transmissions, suspensions, lighting, etc. to mechanical shops around Europe, while taking advantage of an incredibly fragmented industry segment.<\/p>\n
The Polish Backdrop\u00a0<\/strong><\/p>\n \u00a0<\/em><\/strong>Auto Partner’s business is centered around Poland (its equity trades on the Warsaw Stock Exchange), although some of their operations are international in countries like Czechia, Austria, and Germany. The Polish economy, although relatively obscure to US retail investors, is one of the best localities for global investing. Poland, for instance, did not contract during the 2008 recession, and grew 5.1% in 2018. It has a population of 40m people, and is the largest economy in central\/Eastern Europe. FTSE Russel had the conviction to upgrade it to “developed” last year (the first country to be upgraded in 10 years). From a regulatory\u00a0standpoint, Poland is a stable nation — it is a member of the EU & NATO, and has an IFRS-compliant legal\/financial system. Although it is relatively obscure for American investors, it does not have the political uncertainty that occupies most other fast-growing, off the beaten path economies. I challenge readers to identify any other with\u00a05% GDP growth,\u00a0attractive valuations, and a comprehensive legal\/financial infrastructure.<\/p>\n Source: European Commission\u00a0<\/em><\/p>\n Auto Partner Business Model<\/strong><\/p>\n The car parts business is not direct to consumer, but rather, entails distributing parts from manufacturers to auto shops. Auto Partner operates warehouses\u00a0that allow\u00a0it to ship parts from manufacturers to its customers (70% online, 29% in-store, 1% DTC), most of whom are mechanics.<\/p>\n Currently, the auto parts supplier market in Poland is incredibly fragmented — Auto Partner, one of the largest auto parts supply companies, has 7-8% market share. This gives Auto Partner an incredible advantage as it picks\u00a0up “stranded” customers from auto parts suppliers that are smaller and go out of business. More speculatively, this\u00a0fragmentation also provides M&A potential as private equity money is flowing into Poland\u00a0at record levels.<\/p>\n Growth, Financials, and Valuation<\/strong><\/p>\n Auto Partner’s business has been growing rapidly since its IPO in 2016. Here are a few highlights:<\/p>\n \u00a0+31% revenue (3 year compounded annual growth rate)<\/p>\n +43% EBITDA (3 year CAGR)<\/p>\n +53% Net Income (3 year CAGR)<\/p>\n Going forward, management guidance is targeting 20-25% top line growth and possibility for improving EBITDA margins.<\/p>\n Now, let’s model this out as a simply EV\/EBITDA multiple to see how much equity upside there is…<\/p>\n \u00a0If we assume a conservative growth rate of 20% (2020), 20% (2021), and 15% (2022), and ignore the potential for improving EBITDA margin, we will observe the following EBITDA numbers…<\/p>\n Then, if we take the EBITDA numbers and apply 6x, 8x, and 10x multiples, after adjusting for net debt, we can arrive at the 2022 Equity Upside, as seen in the right-most column.<\/p>\n Although you can draw conclusions for yourselves, this model showcases that if Auto Partner can maintain the current 7% EBITDA margin, exhibits growth at or below management guidance (and significantly below the historical average), all while it’s EV\/EBITDA multiple (which is currently 8x) compresses to 6x, there will still be 140% of equity upside in 2022 (which is 2.4x the initial investment, or 34% annual equity returns).<\/p>\n Recommendation: BUY at the current price of 4.33PLN<\/p>\n","protected":false},"excerpt":{"rendered":" By David Shakirov The “hunt for value” in US equity markets is a tough one. High valuations and economic uncertainty are some of the barriers challenging investment managers in the United States, trimming alpha to zero (or, in some cases negative). Abroad, however, frontier and emerging economies offer higher growth potential at lower multiples. These Read more about Auto Partner SA: Polish Auto Parts Apparently Boring, Yet Lucrative<\/span>[…]<\/a><\/p>\n","protected":false},"author":2119,"featured_media":195,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[14],"tags":[4],"class_list":["post-44","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fall-2019","tag-david-shakirov"],"acf":[],"_links":{"self":[{"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/posts\/44","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/users\/2119"}],"replies":[{"embeddable":true,"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/comments?post=44"}],"version-history":[{"count":5,"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/posts\/44\/revisions"}],"predecessor-version":[{"id":61,"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/posts\/44\/revisions\/61"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/media\/195"}],"wp:attachment":[{"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/media?parent=44"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/categories?post=44"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sites.williams.edu\/williamsinsight\/wp-json\/wp\/v2\/tags?post=44"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![](\"https:\/\/static.wixstatic.com\/media\/b15e45_8a85e071344b4a1bb2c2606d75c1c394~mv2.png\/v1\/fill\/w_770,h_405,al_c,lg_1\/b15e45_8a85e071344b4a1bb2c2606d75c1c394~mv2.png\")
<\/em><\/strong><\/p>\n![](\"https:\/\/static.wixstatic.com\/media\/b15e45_63ffb8eb9f2e4d2eadc0885fb7278ed3~mv2.png\/v1\/fill\/w_1260,h_664,al_c,usm_0.66_1.00_0.01\/b15e45_63ffb8eb9f2e4d2eadc0885fb7278ed3~mv2.png\")
<\/em><\/strong><\/span><\/div>\n<\/div>\n<\/div>\n![](\"https:\/\/static.wixstatic.com\/media\/b15e45_48ccbf33fee44d689a5b048cb24d3925~mv2.png\/v1\/fill\/w_1260,h_752,al_c,usm_0.66_1.00_0.01\/b15e45_48ccbf33fee44d689a5b048cb24d3925~mv2.png\")
<\/em><\/strong><\/p>\n