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Research: Industrials
paragon’s renewed focus on its core Automotive operations should soon be confirmed by the divestment of Voltabox. The refreshed strategy remains to drive sustainable, profitable growth through the development of innovative proprietary technology solutions and expanding geographical penetration and footprint. Despite the pandemic disruption to global car production, paragon Automotive is delivering strong sales growth. FY21 revenue guidance is for €145m with EBITDA margins of 12–15%. We expect a recovery in car output and new products to drive growth from FY22.
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paragon |
Focused on growing automotive technology
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Automobiles & parts |
DeutschesEigenkapitalforum 2021
4 October 2021 |
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paragon is a research client of Edison Investment Research Limited |
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paragon’s renewed focus on its core Automotive operations should soon be confirmed by the divestment of Voltabox. The refreshed strategy remains to drive sustainable, profitable growth through the development of innovative proprietary technology solutions and expanding geographical penetration and footprint. Despite the pandemic disruption to global car production, paragon Automotive is delivering strong sales growth. FY21 revenue guidance is for €145m with EBITDA margins of 12–15%. We expect a recovery in car output and new products to drive growth from FY22.
Leveraging the technical knowledge
paragon has built its Automotive operations through innovative new product development and targeted acquisitions. The financial issues, centred on Voltabox, should soon be resolved as the protracted divestment process completes, although paragon is acquiring the auto-related battery products as part of the deal. paragon should return to an automotive-focused group where the refreshed growth strategy is being implemented. Despite the ongoing impact of the global semiconductor shortage on automotive output, paragon Automotive’s FY21 sales are expected by management to show strong growth, with healthy margin expansion as operational leverage is enhanced by the previously implemented cost reduction measures.
Roadmap to the future portfolio and footprint
Almost a year ago management set out a reinvigorated strategy for the development of the product portfolio. Notably, the product strategy is being reset into activity related product lines: Breathe & Protect, Feel & Relax, Listen & Act See & Assist, and Move & Support. See & Assist encompasses the group’s growing AI capabilities that will be integral to new products across the other segments as well as for external non-automotive applications. New R&D facilities have been set up in India and are being expanded in China as local production increases, while new optimum cost country facilities are also being established. Revenue share from China and the United States is targeted to increase to c 70% from 54% in 2020.
Established a base for profitable growth
As it executes its strategy the focused paragon is targeting sustained profitable growth, which should be augmented in FY22 as customers’ output returns to normal levels. Success should see a more globally oriented company with an increasingly sophisticated product offering as interconnectivity increases. Margins are already healthier and the unwelcome distraction of Voltabox should hopefully dissipate when the agreed divestment completes.
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Historical financials
Source: Company reports. Note: *Edison Investment Research estimates (paragon Automotive only). |
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Research: TMT
After returning to growth in Q221, Mensch und Maschine (M+M) reported 15.3% y-o-y revenue growth and 10.6% EBIT growth for Q321. Management maintains its outlook for FY21 revenue growth of 6–10% and EPS growth of 12–21% and expects to report a record performance for the year in both sales and earnings.