The automotive industry is in a state of flux with legacy automakers under pressure from new entrants and the slow transition to EV. But there are always winners in these situations. CTA can be one of them by offering automotive OEMs, which are under immense pressure to reduce costs, a cost leading product without compromising on quality. With significant investment in its sales force and a company culture highly focused on innovation and driving operational efficiencies, CTA is well placed to take share and drive profitable growth. This won’t happen on a straight-line (as seen with today’s downgrades) but on a mid-term view we expect CTA to be a business with much greater scale and capable of achieving mid-teens EBITDA margins. Trading on c.2x EV/EBITDA and c.3x PER is wholly unwarranted. BUY
