Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: Industrials
paragon faces a challenging year, primarily due to growing pains at the Electromobility segment (Voltabox). The Automotive segments’ FY19 sales are guided to be c €130m, near the top of the previous range. Group sales growth continues, albeit slower than expected, with margins reduced by an under-recovery of overheads and rationalisation and integration costs. FY19 guidance was greatly reduced in August. The order backlog of €2.1bn supports stronger growth in FY20, alongside improved profitability due to operational leverage and restructuring benefits in Mechanics. The current rating reflects concerns over the growth strategy following recent events. Restoring investor confidence should be a key management focus.
Written by
paragon |
Automobiles and parts |
Share price graph
Share details
Business description
Bull
Bear
Analyst
paragon is a client of Edison Investment Research Limited |
Growing pains should prove temporary
paragon faces a challenging year, primarily due to growing pains at the Electromobility segment (Voltabox). The Automotive segments’ FY19 sales are guided to be c €130m, near the top of the previous range. Group sales growth continues, albeit slower than expected, with margins reduced by an under-recovery of overheads and rationalisation and integration costs. FY19 guidance was greatly reduced in August. The order backlog of €2.1bn supports stronger growth in FY20, alongside improved profitability due to operational leverage and restructuring benefits in Mechanics. The current rating reflects concerns over the growth strategy following recent events. Restoring investor confidence should be a key management focus.
Innovative technology for auto and power systems
paragon seeks to identify trends ahead of its customers and leverages its strong engineering capabilities to provide innovative solutions that address those factors. The organic growth strategy continues and has been supplemented by acquisitions, increasing the ability to supply system solutions and extend market reach. Voltabox’s market development in battery power systems reflects the strategy and paragon continues to pursue other technology growth opportunities such as body kinematics, air quality and digital assistance. As these mature into full supply, paragon should see growth in its Mechanics (body kinematics) and Electronics (interiors and sensors) activities, as well as Electromobility (Voltabox).
Challenges should unwind next year
The lower sales for Voltabox arising from supply chain issues, a contract deferral and a resultant under-recovery of overheads was the main factor in lower guidance in August. The Mechanics segment (paragon movasys) also incurred excess project cost and integration charges, but overall the Automotive segments expect sales of c €130m with EBIT margins of +2% to +3%. FY19 group revenues are expected to be €200m to €210m (from €230m to €240m previously) with a negative EBIT margin of -1% to -2% (from c +8%). A recovery of EBIT margin is anticipated in FY20. The delay to sales at Voltabox should correct in FY20 and move it back to a profitable growth path. The Mechanics segment should also return to profit as overhead cost reduction in FY19 takes full effect and new programmes ramp up.
Valuation: Delivering profitable growth is key
Clearly with a five-year order backlog of €2.1bn (cf Voltabox of €1.1bn), paragon has the potential for growth, with operating leverage expected to improve margins. If management starts to deliver profitable growth, then the rating should improve.
|
Edison estimates
Source: Company reports, Edison Investment Research |
|
|
Nanogate’s order book of over €600m for delivery during FY19–21, we estimate a third of which relates to the industrial sector, shows the benefits of its long-term strategy of diversification from the European automotive sector. Moreover, while companies making parts for internal combustion engines will be seriously affected by the decarbonisation of transport, this trend is positive for Nanogate. Its N-Glaze and N-metals technologies offer a route for light-weighting both conventional vehicles, where they improve fuel efficiency, and electric vehicles, where the weight of batteries means reducing that of other components is essential. In addition, Nanogate’s solutions for New Mobility support the rapidly increasing numbers of sensors being deployed in vehicles as the industry moves towards fully autonomous vehicles with new models of ownership.