美国电力设备与多产业：为什 么不是IR

1、North America EquityResearchJuly 2019US Electrical Equipment & Multi IndustryWhy Not IR?Standalone IR ClimateCo Should Re-rate Towards LII MultipleSteve Tusa, CFAAC212-266-6623 HYPERLINK mailto:stephen.tusa stephen.tusaJ.P. Morgan Securities LLCPatrick Baumann212-622-0160 HYPERLINK mailto:patrick.m.

2、baumann p HYPERLINK mailto:atrick.m.baumann atrick.m.baumannJ.P. Morgan Securities LLCNicole Cai212-622-1050 HYPERLINK mailto:nicole.cai n HYPERLINK mailto:icole.cai icole.caiJ.P. Morgan Securities LLCSee the end pages of this presentation for analyst certification and important disclosures, includi

3、ng non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only

4、 a single factor in making their investment decision.2019 HVAC Annual Report Summary: The Golden Age Of HVACfundamentals in the midst of golden era: demand solid, supply rational, kept that way by a regulatory regime that is enough to favor those with technology differentiation but not dramatic enou

5、ghto disrupt.Lateincycle, butprematureto callpeak:investorsarenervousaboutcycletiming,butwecontinueto believethat whatbroke last cycle (US housing/construction) will not break this cycle as the core fundamentals remainsolid.Structure sound: Industryplayersmostly restructuredinthe greathousingrecessi

6、on,andthey are now well positionedwith a structurally higher industry entitlement in margins, managing somewhat successfully through another period of price/cost hysteria, coming out the other end set to benefit from stabilization in inputs, and with the focus shifting to new product introductions.C

7、onsolidation would be next leg: Unprecedented movement in industry structure stoking speculation of consolidation, which, if it happened,shouldresultinthenext legofefficiency andhigherreturns.The relatedmelt-updynamic hereisreflectedinthe multiple of LII, the res-focused pure play that has re-rated

8、55% since the last cycle, setting the aspirational benchmark for a high quality pureplay.ToppickisIR: under-appreciatedfranchisequalityasreflectedinbestinclassorganicprofitgrowthonmarketsharegainsand margin upside in commercial HVAC, raising PT, showing 17% upside versus sector at13%.Upgrading JCI t

9、o N: de-rated and fundamentals more stablenow.Downgrading LII to UW: valuationshouldrecoupleto the standingsector average, as the Tornadopass turns intoan execution hurdle and dance floor for consolidation gets crowded, hurting scarcity valuepremium.OW UTX and EMR: HVAC is an aspect of the thesis bu

10、t not the driver.UW WSO: valuation and what we see as structural growthchallenges.2019 HVAC Annual Report SummaryUS Resi Steady She GoesWhileweareclosetonormal,andthecycleisonwatch,indicatorspointto anotheryearofatleastMSDgrowthinunits (pendingweather).HousingandtheUSconsumer arefundamentallysoundei

11、therstillbelowtrendoringoodshapefromabalancesheet perspective,whilelower rates are areinforcingfactor.Ifitsbroke,theconsumerwillreplaceit.Replacementrates are now at the highend of the historicalrange,and after severalyears of trendingaboveactual replacement, these lineshave convergedfurther support

12、ingthe notionwe areat “normal.”Thehousingecho-boomisagoodthesisforfurtherupside,thoughwithmost of theseunits inhotter regions,the callon useful life is tougher, and we may be seeing of this demandalready.JPM Index Implied Replacement versus Actual ReplacementCommercial MarketSolidSource: AHRI, Thoms

13、on Reuters University of Michigan, BLS, NAR, J.P. Morgan estimates.Whiletraditionallya bit more lumpy/cyclicalin natureandmore exposedto businessconfidencethan residential cycle timing remains favorable. With a material part of the market institutional, which lags the broader activity still remains

14、below trend linehere.Mostplayershavepressedhardtoestablishagreatershareinvalueaddedserviceswhichshouldblunttheimpactofthe cycle, and limit the potential for an 08/09 type of cyclicalevent.Chinaisawatchitem,butcurrentlywellbelowentitlement;withacombinedshareof9%,theBig3MNCsseemtohave potentialto take

15、 market shareasgovernmentplannersdriveto highgradetheirbuildingstock with afocus on efficiency.Industry structure soundThesignificantfootprintrestructuringundertakenduringthe great recessionhasset the industryupwellfor thiscycle.Pricehas been surprisinglydisciplinedinthe face of unprecedentedvolatil

16、ityinraw materials.Onlymodest share shifts overthis timeperiodreinforcesthe fact that themoderate increasesintechnologieshave provided an umbrella for everyone to improve margins as volumes in a favorable current marketstructure.Historical Operating Margins HVAC Players vs Sector18%16%14%12%10%8%6%4

17、%200720082009201020112012201320142015201620172018Source: Company reportsConsolidation would drive next legSectorHVACPlayersScalewillremaina keyadvantageas technologycontinuestoevolve, allowinglargerplayerstoleverageinvestmentstostay aheadPotential outcomes on combinations could make the industry str

18、ucture evenAll 3 conglomerates have essentially split up to be pure plays so consolidation is a rampant topic, with most playerssayingthey would be ready to participateinit, giventhe rightsynergies,butarealsocomfortablewheretheyare.By the numbers, IR/JCI makes the mostsense.Summary of Potential Comb

19、inationsMarket ShareUSResiLarge CommlLight CommlCash ROIC / Share Price AccretionShared Upside From Operational SynergiesCarrier/LII43%38%7% cash ROIC for Carrier / 10% upsideforLIIn/aCarrier/JCIMerger32%28%35%10-15% upside forCarrier$1+ B, 2% of combined market cap JCI/LII23%22%8% cash ROIC for JCI

20、 / 10% upsideforLIIn/aJCI/TraneMerger24%31%34%30% upside forIR20%.Less appreciated is Resi/Comml UnitarystrengthWe believe that EBITDA margins for both residential and commercial unitary are close to20%24%22%20%18%16%14%12%10%22%18%18%12%ResiCommlunitaryLargeComml/servicesTK/refrigeration18%18%12%an

21、d Applied/Services relative weakness. The above implies the large commercial franchise is in the lowDD range.Mix explains much of the discrepancy between players (LII premium at 20-30% withresidential/comml unitary, JCI laggard at 0-5% discount with large applied).Source: J.P. Morgan estimatesIR Cli

22、mate EBITDA Margins vs Peers25%16%17%10%+20%16%17%10%+15%10%22%5%0%IR ClimateLIIUTXCCSJCIBuildingsSource: Company reports, J.P. Morgan estimatesTrane Residential HVAC (20% of ClimateCo)TraneResihas consistentlyperformedinlineor betterthanpeeraverageoverthelastthreeyears,andhasonaverage outperformed

23、AHRI (+10% over the last three years, vs AHRI+7%)Trane Resi Quarterly Growth vs Peer AveragevsAHRITrane Resi Quarterly Growth vsPeers-5.0%1Q172Q173Q174Q171Q182Q183Q184Q181Q192-Yr1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19TraneResiCarrierUSResiLennoxResiGoodman NAResiTrane ResiAH

24、RIAverageSource: AHRI,CompanyreportsSource: CompanyreportsAlthoughTraneResistarted slow, it is now catchingup, andestimate an 18% share, positionedjust below leadersCarrierandDaikin/Goodman.Indexed JPM Industry Revenue Growth Versus Public Players Resi Growth2009 = 100%95%200920102011201220132014201

25、5201620172018 WSOequipmentSSS LII Resi HVAC Organic TraneResiHVACJPM Industry Proxy Carrier(approximate)Source: Company reports, J.P. Morgan estimatesThermo King (19% of ClimateCo)TKisa“controversial”asset:highmarginsandstrongcashgeneration,buthistoricallycyclical,anddebatesonvaluegoaslow as “truck

26、stock” valuation.TK has grown 5% CAGR over the past 6 years, 2% above Class8.InitiativessuchasAPU ($300 priortargethadbeen$200 by 2020)havebeenakeydifferentiator,alongwitha more diversifiedglobalskew and the secular“coldchain”trend.Allin,with20%+marginsandMSDgrowththroughacycle,this isasolidasset in

27、the context of globalcapitalgoods.TK vs Class 8 Sales 2012-2018 CAGR6%5%5%4%3%2%1%0%TKClass8Source: Company reports, J.P. Morgan estimates, ACT ResearchThermo King Sales Growth vs Class 8 Sales3%4Q121Q132Q133%4Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q1

28、83Q184Q18Thermo King 4-quarterrolling averageClass 8 RetailSales201320142015201620172018TKClass8Source: Company reports, J.P. Morgan estimates, ACT ResearchTrane Commercial HVAC (60% of ClimateCo)Trane HVAChasgenerallyoutgrownpeersbutmix of portfoliosalwaysafactor,Traneisdiversifiedenoughtomake comp

29、arison to othersappropriate.Trane Comml Sales GrowthvsPeersTrane Comml Orders Growth vsPeers15.0%10.0%5.0%0.0%1Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q19-5.0%1Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q195%0%-10%1Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141

30、Q151Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q181Q19LII CommercialorganicrevsCarrierCommlRevsTraneCommlEquipmentJCI BuildingEfficiencyOrdersCarrier CommlEquipOrdersTrane Comml EquipmentOrdersSource: Company reports, J.P.MorganestimatesSource: Company reports, J.P. Morganes

31、timatesCommercialneedstobelookedatin3separatebuckets:CommercialUnitary($1.2B,UScentric),AppliedEquipment($2.5B, more global),andParts,ServicesandControls($3.4B,alsoglobal,morerelatedto Appliedapplications).Traneis a leaderonbothfronts,with30-40%marketshareinNA,lessinamorefragmentedglobalmarket.Servi

32、cesarean under-appreciatedaspectof thestory,50% ofthetotal“Applied”franchiseafter havingcompoundedata6-7% rate over the past 8 years. The $3.4 B of revenues has a material portion from controls ($500 though bigger on an embeddedbasis).Whilestilladevelopingstory,wethinklowDDmarginscanbemid-teensasser

33、vices/controlscontentincreases,asmanagement executes on restructured footprint. Stay tuned for more color here from management as the marketing of “new ClimateCo ensues.IR V LIIIR vs LII Comparison By The NumbersComparison grid shows that, while having differing exposures, profile by the numbers is

34、similarIRClimate comparesrelativelywellto LIIon the basisof severalfinancialmetrics(EBITDAmargin, grossmargin, FCF conversion, capital intensity andleverage).The LII vs IR Climate comparison shows a similar sized resi business, a more heavily weighted unitary business at IR with largermarket share,w

35、hileTranealsoplaysinlarge whileLII doesnt.Refrigerationlargerat IR andbetter business but, likeApplied/Services/Controlsnot comparable on a likefor likebasis.IR ClimateLIIIR ClimateLIIRevenues123443665Resi24072225Comml unitary1653901Large Comml5908TK/refrigeration2376539IR Climate vs LII Financial M

36、etrics IR ClimateLIIFCF conversion/target100%105%Resi18%FCF conversion/target100%105%Resi18%19%FCF margin (6 yr avg)7%7%Comml unitary18%16%Leverage0.8x1.6xLarge Comml12%Capex % of sales (3 yravg)1.7%2.5%TK/refrigeration22%12%Source:Companyreports,J.P.Morganestimates.Note:Leverageispostdebt paydownfr

37、omMarketShareRevenues12,3443,665Gross margin31%29%EBITDA margin (adj for amort)16%17%16%17%deal proceeds.Resi NA18%17%NA Comml unitary25%13%Large Comml16% HVACEquipment8%4%Source: Company reports, J.P. Morgan estimates.IR V LII (Cont)IR vs LII Portfolio Performance ComparisonResiHVAC: TraneandLennox

38、havegenerallytrendedtogether,thoughafterunderperformingin2013,Traneseemstohave regainedthe upperhandinthelast twoyears. Tornadorecoverywillbekeybutthesearecomparableassets.-10%-20%-30%-40%Trane Comml EquipmentLII Commercial organic revsComml HVAC: growth about in line in Commercial HVAC, though ther

39、e are major differences between the two businesses, which we discuss in more detailbelowbig differenceis that LII is allunitary.Traneprovedto be more resilientthroughthe08- 09downturnTranehastheedgeonscaleinunitary,Applied/Servicesnotcomparablebutpotentiallymorestableall-10%-20%-30%-40%Trane Comml E

40、quipmentLII Commercial organic revsResi Quarterly Growth Trane vs LennoxComml Quarterly Growth Trane vs Lennox30%20%20%10%10%0%0%1Q073Q071Q081Q073Q071Q083Q081Q093Q091Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q181Q192Q084Q082Q094Q092Q104Q102Q114Q112Q124Q122Q134Q132Q144Q142Q1

41、54Q152Q164Q162Q174Q172Q184Q18Trane ResiLennox ResiSource: Company reports, J.P.MorganestimatesSource: Company reports, J.P. MorganestimatesTransport/Refrigeration: TK has averaged 6% growth over the last 8 years in our estimates, vs LII Refrigeration 1%. ComparisonislessapplicableasLIIrefrigerationi

42、sonly10%ofEBITDA,vsTKanestimated25%.TKabetterasset,but materially larger, which is, on net, likely a drag on value givencyclicality.Thermo King vs LII Refrigeration Sales Growth0%-10%1Q112Q111Q112Q113Q114Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174

43、Q171Q182Q183Q184Q18ThermoKingLII RefrigerationorganicSource: Company reports, J.P. Morganestimates 16Valuation: Implied ClimateCo at 12x EBITDA V LII at 17xSOTP reality: using GDI market value suggests IR ClimateCo at 11.8xEBITDAdetermine the current price/share for IR ClimateCo, we take the GDI mar

44、ket cap to determine IRs share which is essentially almost a mirror image put over IRs share count to get to $30/share, which we back out of the stock price to get to $95/share of implied IR ClimateCovalueThis is an implied EV/EBITDA for IR ClimateCo on 2020 numbers of V LII at17xBacking Into IR Cli

45、mateCo ValuationGDI share price35GDI shares outstanding (millions)208GDI market cap (billions)7.2IR share price125IR shares outstanding (millions)242IR IndustrialCo value per share30Implied IR ClimateCo value per share95IR ClimateCo Market Cap (billions)23.1PF Net Debt, 2019 end (billions)2.4Climate

46、Co EV (billions)25.52020E IR ClimateCo EBITDA (JPMe)2.2EV/EBITDA11.8xSource: Company reports, J.P. Morgan estimatesValuation: Re-creating LII Within in IR Suggests 20% Upside For IR ClimateCo1/3 of IRs EBITDA is directly comparable to LII, and we “re-create” LII within IR ClimateCo.We apply LIIs 17x

47、 EV/EBITDA to IRs Resi, unitary, conservative as lower multiple refrigeration asset (recent deals at 0.5x sales) suggest core 18, and an EE/MI sector multiple toTKand back into an implied multiple of 6.2x for IRs Applied/Services business, fundamentallymispriced.This compares to JCI at the closest p

48、eer when it comes to heavy commercial/services weightingthough with recent top line outperformance and similar margin upside, we think a 10% premium is warranted, which suggests an all in fair value for IR ClimateCo of14.0 x EBITDA, or per share.Implied EV/EBITDA Multiple for IR Comml Applied/Svc vs

49、 JCI MultipleIR Industrial vs IR ClimateCo Valuation SharepriceShare count (millions),2019endMarketcap(billions)30.3IR IndustrialCo value per share30IR IndustrialCo value per share30GDI market cap (billions)7.2Implied IR ClimateCo value per share95IR ClimateCo Market Cap (billions)23.1PF Net Debt, 2

50、019 end (billions)2.4ClimateCoEV(billions)25.52020E IRClimateCoEBITDA2.2EV/EBITDA11.8xIRClimateCosegmentbreakEBITDA (incl corp) Multiples ValueCommentResi &commlunitary0.817.0 x13.8 multipleTK0.512.5x6.6 EE/MI multipleCommlapplied&svc0.86.2x5.1 Implied multiple, compares JCI at 11x12x 10 x 8x 6x 4x

51、2x 0 x11.0Implied IR Comml applied&servicesTotalCo2.211.8x25.5 Taken fromabove6.2Note:6.2New EV implied (billions)30.4IR ClimateCo Market Cap implied (billions)28.0Implied IR value per share115Difference vs current implied value per share21%Commlapplied&svNew EV implied (billions)30.4IR ClimateCo Ma

52、rket Cap implied (billions)28.0Implied IR value per share115Difference vs current implied value per share21%Source: Company reports, J.P. Morgan estimatesSource: Company reports, J.P. Morgan estimatesHow did Lennox Re-rate?LII has shown significant growth this cycle to warrant its re-ratingLIIhasave

53、raged6%organicgrowth(vssector4%)and90bpsmarginexpansionthiscycle,whileFCFhasgrownata10% CAGRThisgrowthenabledLIIto re-ratesignificantly, withthestocknowtrading55%higherthiscyclevs last,andcurrentlyat a 20- 30% premium to the market and thegroupThereis elementof strategicoptionalitypotentialbut wethi

54、nk IR willcome outwith thepotentialtodo somethingas well.Lennox Organic Growth10%5%0%-5%-10%-15%Lennox Segment Margins19.0%17.0%15.0%13.0%11.0%9.0%2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020ELIISector7.0%5.0%2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E

55、 2020ESource: Company reports, J.P. Morgan estimatesLennox FCF Margin15%10%5%0%2010201120122013201420152016201720182019E2020ELIISector9.0Source: Company reports, J.P. Morgan estimatesLII P/E vs SectorLIIP/EFY2LII vs Group90%80%70%60%50%Source: Company reports, J.P. Morgan estimates.19Source:Bloomber

56、gJan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18Jan-19VJan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07

57、 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18Jan-19Honeywell Case StudyHON is a good example showing how solid growth gained the stock recognition in the multipleAfter seeing14%/28% declineso

58、norganic/earningsin2009, HONhasaveraged13%EPSgrowth(vssector FCFhas grown at a 16% CAGR since. Organic growth has only recently moved to aboveaverage.The relativemultiplestayed stable with steady earningsgrowth but sluggishorganicgrowth,thoughhas re-ratedinthe last year as the secular story is provi

59、ngout.HON Organic Growth5%0%-5%-10%-15%HON Earnings Growth40%30%20%10%0%-10%-20%-30%-40% Source: Company reports, J.P. Morgan estimatesHON FCF Margin HONSector2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020EHONSectorSource: Company reports, J.P. Morgan estimates. Note: 20

60、19 EPS is lower due to GTX/REZI spin-offsHON P/E vs SectorHONP/EFY2HON vs Group2010201120122013201420152016201720182019E2020EHONSector6.0VGroupPEFY2120%110%100%Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18Jan-19Ja