Strattec Security Corp.

STRT Details

Strattec Security Corporation (NASDAQ: STRT) creates, produces, and distributes mechanical locks, electronic locks, and keys. It also manufactures ignition lock housings and access control equipment. The company provides full-service aftermarket support and ships equipment to customers in the United States, Canada, Mexico, Europe, South America, Korea, and China.

Latest News:

• Fire Accident: VAST LLC, STRT's joint venture company, had a fire at its Taicang, China factory on January 28, 2022, affecting a paint line. As per the company's public information,  VAST China is currently relocating production to its Jingzhou, China site. Additionally, insurance coverage and equipment impairment are presently being investigated.

Q2FY22 Results (ended December 26, 2022)

• Slight Decrease in Sales: The company reported a slight decrease in net sales to USD 112.91 million in Q2FY22 compared to USD 127.36 million in Q2FY21, due to global semiconductor chip shortage.
• Stable Cash Position: The company's cash was USD 14.07 million as of December 26, 2021, compared to USD 14.46 million as of June 27, 2021.
• Healthy Balance Sheet: The company's total current assets were USD 177.92 million and USD 174.90 million, respectively, as of December 26, 2021, and June 27, 2021, compared to current liabilities of USD 66.84 million and USD 77.57 million, respectively, indicating negligible liquidity risk.

Key Risks:

• Competition Risk: STRT competes in a fiercely competitive automotive component supply market, where larger companies with better financial and technological resources compete for head-on. As a result, competitors' enhanced innovation or improved product development may harm the company's market share and its financial performance.
• Customer Concentration Risk: In FY21, STRT's three significant customers (General Motors, Fiat Chrysler Automobiles, and Ford Motor Company) accounted for 62% of net sales and 61% of receivables, respectively. As a result, losing any of these critical clients could harm the company's bottom line. 

Valuation Methodology: EV/Sales Multiple based Relative Valuation

(Source: Analysis by Kalkine Group)

Stock Recommendation:

The company's financial position is improving due to its strategy to be ready for a return to regular vehicle production rates later this calendar year. It has over USD 10 million more inventory than usual. The stock's 52-week high and low is USD 61.20 and USD 31.89. Considering the correction of 32.74% in the stock price over the past one year, stable cash position, a decline in topline, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 38.34, down 0.90% as of February 14, 2022.

STRT's 3-Year Technical Price Chart. (Source: REFINITIV, Analysis by Kalkine Group)

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.