global automotive connectors, cable assemblies and ecu market

© 2018 RocSearch. All Rights Reserved. 1

Global Automotive Connectors, Cable

Assemblies and ECU MarketExternal Insights to Validate Claims of Target in IM

Month 20XX

Table of Contents

▪ Market Size and Outlook 3-9

➢ Global Automotive Connectors Market

➢ Global Automotive Cable/Cable Assembly Market

➢ Global Automotive ECU Market

➢ Technological and regulatory developments

▪ Competition 11-16

▪ Strategy 18

▪ Relative Valuation 20-23

▪ Appendix 25-28


Target X

Global automotive connectors market to post ~6.1% CAGR, reaching €5.57 billion over 2016–2021

Market Size and Outlook

Sources: ‘Automotive Connectors Market by Connection Type’, Markets and Markets (March 2017); ‘2015 Automotive Market Unit Volume Increased 1% Worldwide’, Connector Suppliers (April 2016); (continued in slide notes)

▪ During 2016–2021, the automotive connectors’ market is

projected to grow at a CAGR of 6.1%5 to reach €5.57 billion

– Aftermarket sales accounted for ~10% of the market in

2016

▪ In addition to overall growth in vehicle production, the market

is expected to expand due to increasing use of electronics per

vehicle—which in turn will require more connectors per vehicle

– From 30% in 2010, the average cost of electronics in a

vehicle is projected to reach 35% by 2020 and 50% by

2030

▪ During the forecast period, passenger cars are expected to

constitute the fastest-growing segment of the automotive

connectors market

– This is attributed to the introduction and expected

increase in demand of various advanced safety features

such as night vision, blind spot detection, and lane

departure systems in passenger cars

“What we are seeing is automotive interconnect is outpacing the

rest of the market 2 to 1. In 2016, while the connector market grew

4%, automotive interconnect grew by about 8%.”

– David Einhorn, Business Development Manager, Amphenol

(April 2017)

39.2%

20.4%

10.8%

10.2%

5.3%

4.4%3.2%

6.5%

Other Passenger

Executive

Mini Car

Small Car

Large

MPV

Medium

SUV

70.9%

11.1%

4.1%

4.2%

9.7%

Other Commercial

Medium Bus

Mini Truck

Medium Truck

Light Truck

Commercial Vehicle

3.50 0.64

4.95

5.57

2016

2019

2021F

Automotive Connectors Market – By Vehicle Type

(€ billion, 2016–2021)1

4.14

Commercial

Vehicles

Passenger

Vehicles

Vehicles

Overall

Automotive Connectors Market – By Vehicle Type

(€ billion, 2016)1, 2, 3, 4

Passenger

VehiclesCommercial

Vehicles

3.15 0.57

Notes: (1) All currency conversions are as per the average annual $–€ currency conversion rate as defined on page no. 28 in the appendix section; for data beyond 2017, average annual currency conversion rates have been used

(2) ‘Other passenger’ includes segments such as Sports, Luxury Cars, Minivans, Pick up Trucks and SPVs

(3) ‘Other commercial’ includes segments such as semi-trailers, heavy truck, small bus, large bus, vans and mini bus

(4) Segmental data for passenger and commercial vehicles does not include aftermarket sales

(5) CAGR has slightly improved due to the impact of currency conversion to EUR

Global Automotive Connectors Market (1/2)

Passenger Vehicle


Target X

The Asia Pacific region, especially China and India, is likely to register the fastest annual growth

in the next five years


Automotive Connector Market – By Region

(€ billion, 2012–2016) 1, 2▪ The geographical share of automotive connectors is proportional to the number of vehicle units produced in each of

these regions

– In 2015, China produced ~27% of vehicles, with the production posting a 8.33% CAGR during 2012–2015

– However, its relative share remained lower compared with North America and Europe due to a significantly lower

manufacturing cost

▪ In the forecast period, the Asia Pacific region (including China) is projected to register the fastest annual growth

– The growth can be attributed to the improving socio-economic conditions and boom in the manufacturing of

vehicles in emerging economies such as India and China

– The region will also witness evolution of concept and increase in the manufacturing of electric vehicles as well as

increased used of emerging technologies in a vehicle, thus expanding the share of electronics and connectors

used per vehicle

North America30.0%

Europe32.0%

Japan9.0%

China19.0%

Asia Pacific7.0%

ROW3.0%

3 pps

1.7 pps

4.4 pps

5.6 pps

0.80 pps

100% =

€ 4.14

Bn

Global Automotive Connectors Market (2/2)

Sources: ‘Automotive Connectors Market by Connection Type’, Markets and Markets (March 2017); ‘2015 Automotive Market Unit Volume Increased 1% Worldwide’, Connector Suppliers (April 2016); (continued in slide notes)


(2) The percentage point (pps) change in the geographical share of the market has been calculated for the period between 2012 and 2015


Target X

For automotive cables/cable assemblies, commercial vehicles are projected to grow faster than

passenger vehicles at 8.5% CAGR in the next few years


Sources: Automotive Wiring Harness Market worth 61.30 Billion USD by 2021, Markets and Markets (March 2017); ‘Automotive Cable Assembly Market Up 7.2% in 2014’, Bishop & Associates (May 2015); (continued in slide notes)

▪ During 2016–2021, the automotive cable/cable assemblies

market is projected to grow at a CAGR of 8.2%5 to reach

€54.4 billion; of this aftermarket sales accounted for ~11%

value in 2016

– Key growth drivers are expected to be increasing

installations of advanced driver assistance systems,

stringent automotive safety norms introduced by the

government and rising preference of automotive

electricals among end-users

▪ Though the commercial vehicles segment accounts for a

lower share of the market, it is projected to register an above-

average CAGR of 8.5% till 2020

Geographical Segment

▪ Asia-Pacific is expected to grow the fastest due to increasing

penetration of high-end electronic features in passenger cars

and growing demand for light and heavy vehicles in various

countries

Product Segment

▪ In application terms, chassis wiring accounted for the largest

share, followed by body and speed sensors, respectively

▪ Speed sensors harness is expected to show the highest

CAGR in the next five years

34.8%

24.7%

8.3%

10.9%

7.3%

4.6%

4.0%

5.4%

Other Passenger

Executive

Mini Car

Small Car

Large

MPV

Medium

SUV

75.3%

10.6%

4.1%2.7%

7.3%

Other Commercial

Medium Bus

Mini Truck

Medium Truck

Light Truck

Commercial Vehicle28.9 7.7

46.46

54.39

2016

2019

2021F

Automotive Cable/Cable Assemblies Market –

By Vehicle Type

(€ billion, 2016–2021)1

36.7

Commercial

Vehicles

Passenger

Vehicles

Vehicles

Overall

Automotive Cable/Cable Assemblies Market – By Vehicle Type

(€ billion, 2016)1, 2, 3, 4

Passenger

VehiclesCommercial

Vehicles

29 6.6

Global Automotive Cable/Cable Assembly Market


(2) ‘Other passenger’ includes segments such as Sports, Luxury Cars, Minivans, Pick up Trucks and SPVs

(3) ‘Other commercial’ includes segments such as semi-trailers, heavy truck, small bus, large bus, vans and mini bus



Passenger Vehicle


Target X

Because of expected rise in sales of heavy commercial vehicles, global ECU market for

commercial vehicles to grow relatively faster than for passenger vehicles during 2016–2024


Sources: ‘Automotive Electronic Control Unit (ECU) Market’, Esticast Research & Consulting (August 2017); Global Market Insights (May 2018); (continued in slide notes)

▪ During 2016–2024, the automotive ECUs market is projected

to grow at a CAGR of 8%5 to reach €49.7 billion; in 2016,

aftermarket sales accounted for ~5% of the market

– Key growth drivers are rising electronic content per

vehicle, increasing vehicle production, increased stringent

government regulations for passenger safety, and

development of low-cost ECUs

– Surging preferences for sustainable technologies, electric

vehicles, eco-friendly driving systems, and energy-

preserving vehicles, are expected to subsequently boost

the automotive ECUs market

▪ The passenger vehicles segment held the largest share in

2016 and is projected to post a 6.3% CAGR during the

forecast period

▪ The commercial vehicles segment is forecast to post a

relatively higher than average CAGR of 7.6% in the period,

driven by expanding heavy commercial vehicles sales

31.2%

24.9%

9.2%

10.7%

9.4%

5.6%

3.5%

5.5%

Other Passenger

Executive

Mini Car

Small Car

Large

MPV

Medium

SUV

72.5%

10.8%

3.7%

4.4%

8.6%

Other Commercial

Medium Bus

Mini Truck

Medium Truck

Light Truck

Commercial Vehicle

24.8 2.0

33.8

42.6

49.7

2016

2019F

2022F

2024F

Automotive ECUs Market – By Vehicle Type

(€ billion, 2016–2024)1

26.8

Commercial

Vehicles

Passenger

Vehicles

Vehicles

Overall

Automotive ECUs Market – By Vehicle Type

(€ billion, 2016)1, 2, 3, 4

Passenger

VehiclesCommercial

Vehicles

23.55 5.18

Global Automotive ECU Market (1/2)

Notes: (1) All currency conversions are as per the average annual USD–EUR currency conversion rate as defined on page no. 28 in the appendix section; for data beyond 2017, average annual currency conversion rates are used

(2) Other passenger include segments such as Sports, Luxury Cars, Minivans, Pick up Trucks and SPVs

(3) ‘Other commercial’ segment includes vehicles such as semi-trailers, heavy trucks, small buses, large buses, vans and mini buses



Passenger Vehicle


Target X

Asia-Pacific countries such as India, China and Japan are likely to register significant growth in

the long term


Automotive ECUs Market – By Region

(€ billion, 2016)1

Geographical Segments

▪ Geographically, Europe led the market in 2016 and accounted for ~34% of the market value (~ €10.4 billion)

▪ Asia-Pacific is projected to show the highest growth rate, registering a CAGR of 7.7% from 2016 to 2024

– Increase in automobile sales, escalating vehicle safety standards and focus on fuel-efficient vehicles are likely to be a few of

the key growth drivers

– The market is likely to grow further due to the surging preference for sustainable technologies, electric vehicles, eco-friendly

driving systems, and energy-preserving vehicles—especially in countries such as India, China and Japan

Product Segments

▪ The safety and security, powertrain, and entertainment segments are expected to witness above-average growth during the

forecast period

– In 2016, power steering systems (part of the safety and security segment) constituted the leading area—accounting for 21.1%

share of the total market; it is anticipated to maintain its dominance throughout the forecast period

– Further, engine management systems are anticipated to witness the highest growth rate of 7.6% in the near future as a result

of an ever-growing demand for energy-efficient vehicle systems

Europe34.3%

Asia-Pacific27.0%

North America26.9%

ROW11.8%

100% =

€28.8

Bn

Global Automotive ECU Market (2/2)

Sources: ‘Automotive Electronic Control Unit (ECU) Market’, Esticast Research & Consulting (August 2017); Global Market Insights (May 2018); (continued in slide notes)

Notes: (1) All currency conversions are as per the average annual USD–EUR currency conversion rate as defined on page no. 28 in the appendix section; for data beyond 2017, average annual currency conversion rates are used

Table of Contents


➢ Global Automotive Connectors Market

➢ Global Automotive Cable/Cable Assembly Market

➢ Global Automotive ECU Market

➢ Technological and regulatory developments


▪ Strategy 18


▪ Appendix 25-28


Target XMarket Size and Outlook

Technological developments such as connected cars, electric/hybrid vehicles and autonomous

cars are expected to be key market driversTechnological and Regulatory Developments

Autonomous Cars

▪ Fully autonomous cars are forecast to account for

15% of the passenger vehicle segment by 2030,

with 135 million units

▪ Increasing demand for semi-autonomous

technologies and rising demand for comfort and

convenience in vehicles in developing countries are

likely to be among the key drivers

Electric Vehicles and Hybrid Cars

▪ In 2016, global stocks of Electric Vehicles and hybrid

cars grew at 59.5% and 55.7% Y-o-Y, respectively;

China accounted for the greatest share

Connected Cars

▪ Growing demand for vehicle-to-vehicle management and safer

driving are key drivers of growth in the connected cars market

globally

▪ Sales of connected cars are expected to grow four fold during

2017–2020, primarily in the passenger car segment

▪ Connected cars typically utilise advanced telematics,

infotainment and advanced driver assistance system

(ADAS) solutions

Greater Emphasis on Decreasing Carbon Emission

▪ Countries globally are introducing regulations to curb carbon

emissions

▪ The US, Europe and other regions have introduced regulations to

improve internal combustion engines (ICEs) of the vehicles and

make them more fuel efficient

– This is likely to propel original equipment manufacturers

(OEMs) to innovate and use enhanced technologies, which

would, in turn, require additional connectors, cable

assemblies and ECUs

Sources: RocSearch Primary Research

Greater innovation and technology enhancements in automobiles

are likely to result in an increased need of automation; which will,

in turn, raise the number of connectors, cable assemblies and

ECUs used per vehicle. Further, manufacturers of these

components are likely to witness demand in innovating for the

OEMs, who aim to be technologically advanced

Table of Contents



➢ Connectors and Cable Assemblies – Market

Landscape

➢ Connectors and Cable Assemblies – Engagement

Model

➢ ECU – Market Landscape and Engagement Model

➢ Contract and Pricing Terms

➢ Key Success Factors

➢ Competitor Benchmarking

▪ Strategy 18


▪ Appendix 25-28


Target XCompetition

Tier 3 (Local): Have presence in selected

countries

Tier 2 (Regional): Have presence in a

few continents

Tier 1 (Global): Have a

worldwide presence

▪ Global automotive connectors market is highly consolidated, with top 10 players accounting for 89% in 2016

▪ The market is also characterised by the presence of numerous players that compete for the remaining 11%. These are either small companies located in low-cost destinations such as China or firms

operating in niche segments (such as Target X that focusses on trailer and tractor connectors)

▪ Tier-1 manufacturers (such as TE Connectivity, Delphi and Molex) enjoy economies of scale and have global manufacturing presence, which helps increase market penetration; they also have wide

product portfolios enabling them to cross-sell and upsell

▪ Midsized tier-2 manufacturers (such as Target X and Phillips Industries) focus on niche segments and have a few large contracts that contribute to their top line

▪ Contract manufacturing and buying white label products to cater to clients’ needs is common in the industry, with tier-1 companies often engaging with tier-2 and tier-3 manufacturers

Sources: RocSearch Expert Consultation

TE Connectivity

37

Yazaki19

Delphi13

JAE4

Sumitomo4

JST3

AVX3

Rosenberger2

Amphenol2

Korea Electric Terminal

2

Others11

Connectors and Cable Assemblies – Market Landscape

Global connectors and cable assemblies market is characterised by the presence of large

multinational companies; Target X competes with other midsized niche players

Global Market Landscape – Connectors and Cable Assemblies Automotive Market for Connectors, Market Share of Top 10 Suppliers (%, 2016)1


Target X

1: Directly Contracting with OEM

OEM (Typically Tier 1) Channel PartnerSupplier (Typically Tier 1)

OEM (Typically Tier 2 and 3) Channel PartnerSupplier (Typically Tier 2

and 3)

2: Collaborating with Channel Partner

▪ In this model, the supplier directly contracts with the OEM; the

engagement terms such as price, duration and annual volumes are

fixed between the two entities

▪ However, the OEM places orders through a channel partner (such

as Arrow and Mouser). This reduces the administrative hassle for

the OEM and ensures that they have access to a global supply

chain

▪ The channel partners typically earn a margin of 15%–20%, which is

borne by the OEM

▪ Most of the tier-2 and tier-3 suppliers engage with channel partners,

who promote their products among OEMs. Hence, suppliers do not

sign direct contracts with the OEMs

▪ This model is also employed by OEMs when they have limited

knowledge of quality benchmarks of the product

─ For instance, an OEM innovating with electric vehicles may

seek a channel partner’s inputs on supplier selection, based on

required quality

▪ The channel partner’s margin is typically borne by the supplier

3: Directly Contracting with original equipment supplier (OES)

▪ Channel partners do not feature in an engagement between suppliers, which is typically for

white label products

Target X has presence across all the engagement models, it has direct contracts with OEMs (such as

Ford and Daimler). OEM and OES contracts accounted for 81.2% of its revenue in 2017, followed by

channel partners (18.8%)

Connectors and Cable Assemblies – Engagement Model

While tier-1 connector and cable assembly suppliers contract directly with OEMs, tier-2 and tier-3

suppliers engage with channel partners to increase market penetration

Competition



Target X

Global Market Landscape – ECUs Global Engagement Model – ECUs

ECU Supplier (Tier 2

and 3 companies) OES (Tier-1 companies) OEMs

▪ The tier-2 and tier-3 suppliers typically do not directly engage with OEMs; the former manufacture for

OESs, who in turn contract with the OEMs

▪ While the OESs have manufacturing presence, they contract with tier-2 and tier-3 companies either to

enhance regional presence or for procuring white-label products

▪ The OESs contract with a tier-2 and tier-3 supplier for the hardware and an IT company for the

software, to develop an offering for the OEM

▪ A channel partner may feature in the engagement model, if the OEM has partnered with them (similar

to that for connectors and cable assemblies)

Tier-1 Suppliers: Companies

that are the interface for OEMs

Tier 2 and 3 Suppliers: Firms that

manufacture ECUs and sell to OESs

Software Companies: Firms that

provide the software support to ECU

manufacturers

▪ ECU manufacturers (tier-2 and tier-3 suppliers) design and manufacture software and

hardware solutions and are often used in outsourcing capacity by OESs, who are primarily the

interface and customers of the automotive OEMs

▪ Key players in the automotive ECU market include Delphi, Bosch, Continental AG, Denso,

TRW Automotive and Autoliv; these players focus on M&A, agreements and contracts with

other manufacturers to enhance their product portfolio and regional presence

─ They also invest heavily in R&D to offer product differentiation as well as cost-effective

ECUs by building technology partnerships with other participants in the ecosystem

The ECU market landscape varies from that of connectors and cable assemblies. Most of the

connector manufacturers do not feature amongst the top 5 ECU companies (excluding Delphi)

Further, in contrast to the engagement model followed in the connectors and cable assembly

market, tier-2 and tier-3 ECU suppliers engage with tier-1 companies, who are the interface for

OEMs

Target X has a minor presence in the ECU domain, with the segment accounting for 0.8% of its

revenue in 2017

ECU – Market Landscape and Engagement Model

Unlike the connectors and cable assemblies segment, tier-2 and tier-3 ECU suppliers

manufacture for tier-1 firms, who are the primary interface for OEMs

Competition



Target X

Contracting Terms Connectors Cable Assemblies ECU Comments

Type of Contract Fixed quantity over a period▪ Both OEMs and OESs sign fixed-quantity contracts with suppliers; however,

volumes are revised annually

Duration of Contract

3–5 years (depending

on the life of the

platform)

3–5 years (depending on

the life of the platform)

5–8 years (depending

on the life of the

platform)

▪ The contracts are signed for the duration that a vehicle model will be in the market;

these are only revisited when the vehicle design is revised

▪ In case of commercial vehicles, a model is not updated frequently; hence, the

revisions are not made often. However, in the passenger vehicle segment, where a

few models are designed for the competitive market, the revisions may happen

every three years

Payment Terms (in terms of

days)30–90

▪ While the payment term for OESs is typically 30 or 60 days, OEMs typically

command a higher bargaining power with a credit period up to 90 days

Annual Price Revisions

▪ Suppliers offer annual price hike/decrease, depending on the type of engagement

─ Large suppliers innovate for OEMs and incur the cost of R&D. When pricing the product for the first year, they look to achieve breakeven and recover their

investment; hence, in the years thereafter, they offer a discount to the OEM

Price Ceiling Not applicable Pegged to copper prices Not applicable

▪ Connector and ECU suppliers do not define a price ceiling, beyond which the

increase/decrease in feedstock cost is passed on to the customers

▪ However, cable assembly suppliers peg the prices to copper (a key feedstock)

▪ Connector and ECU companies do not face major pricing pressures due to feedstock prices. However, since these

companies innovate for the suppliers, they need to ensure that the end product falls within the latter’s budget

▪ Raw material cost (primarily that of copper) is a key pricing pressure faced by cable assembly suppliers. Since

copper is commoditised, the customers keep a tab of price fluctuations and demand rebates if prices decrease

Pricing Pressure

Contract and Pricing Terms – Suppliers and OEMs/OESs

Contracts between the supplier and OEM/OES are typically signed for the life of the platform,

with annual volume and price revisions

Competition



Target X

Key Success Factor DescriptionImportance for Tier 1

Suppliers

Importance for Tier 2

and Tier 3 Suppliers

Quality▪ Quality is the most important factor considered by OEMs while procuring connectors, cable assemblies and

ECUs; hence, suppliers typically have a high focus on certifications

Price Competitiveness

▪ OEMs typically seek quotations from 2-3 suppliers, before awarding a new contract, to ensure price

competitiveness

▪ This is a key success factor for tier-2 and tier-3 suppliers as they need to compete with tier-1 suppliers, who have

achieved economies of scale, have global manufacturing presence and employ sophisticated technologies

Technology Innovation

▪ Most of the tier-1 suppliers innovate for the OEMs by investing in R&D, while the tier-2 and tier-3 suppliers may

not have these capabilities

─ However, in November 2017, Target X developed, for Ford, a connector which transmits data signals for a

reversing camera and the tyre pressure, for the OEM’s new trailer model

▪ While leading OEMs prefer partnering with tier-1 suppliers that can support them during the development phase, it

is also common for the former to engage with tier-2 and tier-3 suppliers for niche products

Existing Relationship▪ This is a key success factor for all suppliers as developing a strong relationship with OEMs provides opportunities

to cross-sell and upsell

Financial Stability ▪ Since OEMs contract with suppliers for the lifetime of the platform, financial stability is a key success factor

HighLow Med

Legend

“Quality is of utmost importance. At the same time, most of the business will go to companies

with previous or established relationship. We do create competition and look to have multiple

suppliers to hedge against supplier risk.”

– Technical Leader, Ford (January 2018)

Key Success Factors – by Type of Supplier

Quality, price competitiveness and existing relationships are key success factors for midsized

suppliers (such as Target X)

Competition

“Existing relationships are a must, specifically in the ECU industry.

The only reason why our company was awarded multiple times for

this product is because we have a history with the OEM”

– Senior Software Engineer, Continental Automotive (January

2018)



Target X

Sources: RocSearch Expert Consultation; Annual Reports; Company Presentation; Company Websites

Company Rank Comments

TE Connectivity 1 ▪ TE Connectivity is the leading automotive connector manufacturer and has a wide range of product offerings

▪ It has direct contracts with leading OEMs and has the ability to innovate for them; hence, the company has a good technological reputation

▪ However, the company does not have presence in the ECU segment

Target X 2 ▪ Target X focusses highly on connectors and cable assemblies, with the commercial and passenger vehicle segments accounting for the majority of its

revenue

▪ The company has manufacturing presence in low-cost destinations and is able to penetrate the market as its focusses on a niche segment (tractor and

trailer connectors)

Stoneridge 3 ▪ The company does not feature in the top 100 automotive electronic part manufacturers list; however, it is highly focussed on the ECU segment

▪ It has manufacturing presence in 8 countries

Phillips Industries 4 ▪ Phillips Industries is Target X’s close competitor as the company only focuses on connectors for the commercial segment

Littelfuse 5 ▪ It does feature in the list of top 100 companies but has very low focus on connectors and cable assemblies

Hopkin's Towing Solutions 6 ▪ The company only has presence in the US and Mexico and focusses on selling automotive aftermarket products to distributors and retailers

“Companies such as Target X have 2-3 large clients that

contribute to their top line. They would typically have

long-standing relationships, which bring in steady

business.”

– Corporate Strategy Consultant, TE Connectivity

(January 2018)

Target X Competitor Benchmarking

The market is characterised by the presence of large players such as TE Connectivity, but Target

X competes with firms such as Phillips Industries, which focus on niche segments

Competition

“Target X is a niche manufacturer who has already

established a stand and defined the market.They win

contracts based on their existing relationships and

expectations.”

– Senior Software Engineer, Continental Automotive

(January 2018)

Table of Contents



▪ Strategy 18


▪ Appendix 25-28


Target XStrategy

Sources: RocSearch Primary Research

1: Flooding the Market with a Wide Range of Offerings 2: Focusing on a Niche Segment

▪ Industry veterans believe that most of the suppliers currently have a wide range of offerings; hence,

flooding the market is not considered as a key success factor

▪ Further, procuring white label products is commonly practiced amongst tier-2 and 3 suppliers, which

enables companies to cross-sell and upsell products

▪ While having a robust product portfolio (primarily catering to the commercial segment) benefits

Target X, it is not considered as a unique strategy in the industry

▪ Since midsized companies (such as Target X) may not have capabilities to compete with the likes of

TE Connectivity and Delphi, they typically focus on a niche segment to increase market penetration

and innovate

▪ This strategy reaps benefits as the large suppliers engage with such companies to expand their

product portfolio.

“It is not very difficult to flood the market with the wide breath of products but the

company needs to ensure that they are high-quality products and showcase

capabilities. Large companies such as Delphi and TE have reached this reputation

based on their quality and after many years.”

– Technical Leader, Ford (January 2018)

“OEMs have multiple suppliers in a domain and will not be looking to purchase

from one company alone. While having a wide product portfolio will help in

cross-selling and upselling, it is not a key success factor.”

– Design Engineer, Molex (January 2018)

“Having a wide product offering is something all companies are doing currently. If

companies do not have manufacturing capabilities, they procure white label products from

Chinese manufacturers; hence, they still have an opportunity to cross-sell and upsell.”

– Corporate Strategy Consultant, TE Connectivity (January 2018)

“Target X operates in the niche segment (which is commercial vehicles). Such companies

are a minor segment of the overall market but are good acquisition targets; specifically for

giants such as TE, which are looking to increase market share by adding these niche

products.”

– Corporate Strategy Consultant, TE Connectivity (January 2018)

“Operating in a niche segment does give more focus to the company. It

also enables the company to sell products to OESs who may be

looking to expand their portfolio.”

– Design Engineer, Bosh (January 2018)

Third-party Opinion on Target X’s Strategies

A wide range of offerings is not considered as a key strategy in the industry; focussing on a

niche segment is believed to be Target X’s USP

Table of Contents



▪ Strategy 18


▪ Appendix 25-28


Target X

0.81x

5.22x

1.65x

0.65x

0.32x

0.83x

1.77x

0.35x

1.49x

0.91x0.50x

0.00x

1.00x

2.00x

3.00x

4.00x

5.00x

6.00x

Relative Valuation: Comparable Transactions (1/2)

TARGET PKC GroupIntercontec

ProduktFCT Electronic

Kabel-Technik-

Polska

Durapart

IndustriesColeman Cable Molex Prestolite Wire Watteredge Nexen Tech

China Auto

Electronics Group

Country Finland Germany Germany Poland Norway US US US US S. Korea China

AcquirerMotherson Sumi

SystemsTE Connectivity Molex Groclin AQ Group Southwire Koch Industries General Cable Coleman Cable

Route One

Investment

THB Auto

Electronics

% Acquired 93.8 100 100 100 100 100 100 100 100 69.7 100

Deal Value (€ mn) 687 305 50 23 11 351 4,907 46 28 36 194

EV (€ mn) 687 305 50 23 10 571 4,907 46 28 58 194

Revenue (€ mn) 845 58 30 35 33 692 2,773 131 19 64 391

Date Jan 2017 Jul 2016 Aug 2013 Mar 2013 Aug 2012 Dec 2013 Sep 2013 Oct 2012 May 2012 Jun 2017 Oct 2016

Median: 0.83x

Europe US Asia

EV/Revenue

Median EV/Revenue for US-based targets (1.16x) is higher than the global median, while for

Asian targets (0.70x) it is marginally lower; European targets (0.81x) closest to global median

Sources: Thomson Eikon; Capital IQ; Mergermarket


Target X

11.63x15.32x

19.06x

8.34x

10.91x

6.21x

11.37x

5.79x

0.00x

5.00x

10.00x

15.00x

20.00x

25.00x

Relative Valuation: Comparable Transactions (2/2)

TARGET PKC GroupIntercontec

ProduktFCT Electronic

Kabel-Technik-

Polska

Durapart

IndustriesColeman Cable Molex Prestolite Wire Watteredge Nexen Tech

China Auto

Electronics Group

Country Finland Germany Germany Poland Norway US US US US S. Korea China

AcquirerMotherson Sumi

SystemsTE Connectivity Molex Groclin AQ Group Southwire Koch Industries General Cable Coleman Cable

Route One

Investment

THB Auto

Electronics

% Acquired 93.8 100 100 100 100 100 100 100 100 69.7 100

Deal Value (€ mn) 687 305 50 23 11 351 4,907 46 28 36 194

EV (€ mn) 687 305 50 23 10 571 4,907 46 28 58 194

EBITDA (€ mn) 59.1 19.9 2.6 -- -- 68.6 449.7 -- 4.6 5.1 33.5

Date Jan 2017 Jul 2016 Aug 2013 Mar 2013 Aug 2012 Dec 2013 Sep 2013 Oct 2012 May 2012 Jun 2017 Oct 2016

Median: 11.14x

Sources: Thomson Eikon; Capital IQ; Mergermarket

Europe US Asia

Not A

va

ilab

le

Not A

va

ilab

le

Not A

va

ilab

le

EV/EBITDA

All European targets had higher EBITDA multiples than the global median; in case of the US, the

EBITDA multiples for all the targets were lower than the median


Target XRelative Valuation: Comparable Companies (1/2)

2.301.67

3.88

0.760.62

2.65

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

TE Connectivity Aptiv PLC Amphenol Stoneridge Sumitomo Electric Industries Ltd. Hirose

COMPANY TE Connectivity Aptiv Amphenol Stoneridge Sumitomo Electric Industries Hirose

Headquarters Switzerland UK US US Japan Japan

Market Cap (€ mn) 28,961.4 20,343.1 23,268.3 607.4 11,438.1 5,078.8

EV (€ mn) 27,399.2 26,189.6 23,662.2 544.6 14,992.8 2,589.8

Revenue LTM (€ mn) 11,889.5 15,647.0 6,092.1 716.0 24,135.2 977.2

Median: 1.99x

USEurope Asia

Sources: Bloomberg

EV/Revenue

Amphenol’s strong historical growth and high market share are the key factors contributing to its

high revenue multiple (as well as EBITDA multiple)


Target XRelative Valuation: Comparable Companies (2/2)

11.2710.26

16.42

7.37

5.97

8.24

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

TE Connectivity Aptiv PLC Amphenol Stoneridge Sumitomo Electric Industries Ltd. Hirose

Median: 9.25x

COMPANY TE Connectivity Aptiv Amphenol Stoneridge Sumitomo Electric Industries Hirose

Headquarters Switzerland UK US US Japan Japan

Market Cap (€ mn) 28,961.4 20,343.1 23,268.3 607.4 11,438.1 5,078.8

EV (€ mn) 27,399.2 26,189.6 23,662.2 544.6 14,992.8 2,589.8

EBITDA LTM (€ mn) 2,431.8 2,552.5 1,441.0 73.8 2,512.9 314.5

USEurope Asia

Sources: Bloomberg

EV/EBITDA

The median EBITDA multiple of 9.25x for trading comps is largely in range with the median

EBITDA multiple of 11.14x from transaction comps

Table of Contents



▪ Strategy 18


▪ Appendix 25-28


Target XAppendix

Global Agriculture Vehicles Market

Global farm tractor market forecast to grow during 2017–2022, driven by Asia Pacific

42.9 44.4

58.1

2016 2017F 2022F

Global Farm Tractors Market – by Value

(€ Billion, 2016–2022F) ▪ Farm tractors is the largest segment in the agricultural vehicles market; it accounted for the greater share of the total value of agricultural vehicles market in 2016

▪ The farm tractors market is projected to post a 5.53% CAGR during 2017–2022 to reach €58.1 billion

▪ Strong population growth, need for food security, rising demand for energy crops and labour shortages are expected to be the key market drivers

▪ Within the farm tractor market, the four-wheel-drive farm tractors segment is projected to grow at the fastest rate during 2017–2022 due to increased use of high-powered farm tractors

▪ Asia-Pacific is projected to register the highest growth of 6.0% CAGR (by value) in the forecast period; China and India are expected to be the major contributors to growth

Global Farm Tractors Market

Sources: Frost & Sullivan Military Aerospace; CNBC


Target XAppendix

Global Military Land Vehicles Market

18.3

21.9

26.9

2016 2017F 2022F

Global Military Land Vehicles – by Value

(€ Billion, 2013–2022F)▪ During 2017–2022, the global military land vehicles market is estimated to post a moderate growth of

4.2% CAGR

─ While large markets such as the US are looking to upgrade and maintain the existing fleet, rather

than replacing aging vehicles, other regions are likely to purchase new units

─ While growth in new units is likely to translated into increased demand for connectors, cable

assemblies and ECUs, upgradation demand is expected to increase aftermarket sales

▪ Geopolitics and strategic interests, rising threat from adjoining regions, and the need to maintain global peace and stability will be the key drivers

▪ Asia Pacific’s defence spending is forecast to increase, led by China and Japan, which is likely to translate into higher volumes of military land vehicles

Sources: Frost & Sullivan Military Aerospace; CNBC

Addition of new units and upgradation of ageing units likely to be opportunity areas for

connector, cable assembly and ECU manufacturers in the defence segment


Target XAppendix – Relative Valuation

Company Description

PKC GroupFinland-based company that offers design and contract manufacturing services for wiring

harnesses, cabling and electronics for the automotive industry

Intercontec ProduktGermany-based manufacturer of metric circular connectors, cable assemblies,

electromechanical components and system solutions

FCT ElectronicGermany-based company engaged in the manufacture and supply of connectors,

connector-systems, metal and plastic hoods, contacts, and cable assemblies. The company

serves several industries including automotive

Kabel-Technik-PolskaPoland-based company engaged in the design, manufacture, and supply of cable

harnesses, steering harnesses, and cabinets. The company offers its products for rolling

stock, energy, industry, material handling and on/off highway commercial vehicle industry

Durapart IndustriesNorway-based wire manufacturer. It offers power cable solutions, wiring and engine

harnesses, electrical distribution centrals, and system units for the automotive industry

Coleman CableUS-based manufacturer and innovator of electrical and electronic wire and cable products

for consumer, commercial, and industrial applications. The company has a diverse product

line including automotive wires

Molex

US-based company engaged in the design, development and manufacture of electronic

components and solutions. Markets that the company serves include mobile devices,

infotech, consumer electronics, automotive, telecommunications, industrial, medical, military

and aerospace

Prestolite WireUS-based company engaged in manufacturing of wires and cable, automotive harnesses,

and aftermarket products

WatteredgeUS-based company engaged in designing, manufacturing and selling secondary power

connectors. The industries that it serves include steel, chemical, chlorine, power

generation, fiberglass and automotive

Nexen Tech

South-Korea-based company which provides wiring harnesses for the automobile industry.

The company offers wiring lay-out products, fuse and relay boxes, protectors, connector

assemblies, terminals/cables, etc.

China Auto Electronics

GroupChina-based company that researches, manufactures, develops and sells automotive

electrical and electronics distribution system

Company Description

TE ConnectivitySwitzerland-based company engaged in the design, manufacture, and sale of connectivity and

sensors solutions. The company serves industries such as transportation, industrial

applications, medical technology, energy and data communications

Aptiv

UK-based company engaged in the manufacture of vehicle components. It provides electrical

and electronic, powertrain, and safety technology solutions to the automotive and commercial

vehicle market. The company’s electrical and electronics segment offers connectors, wiring

assemblies and harnesses

AmphenolUS-based manufacturer of electronic and fibre optic connectors, cable and interconnect

systems. It offers products for various industries such as automotive, broadband

communication, commercial aerospace, industrial and information technology

StoneridgeUS-based manufacturer of electrical and electronic components, modules and systems

principally for the automotive, commercial vehicle, motorcycle, agricultural and off-highway

vehicle markets

Sumitomo Electric

IndustriesJapan-based manufacturer of electric wires and cables mainly for automotive, information &

communications, electronics, environment & energy, and industrial materials

HiroseJapan-based manufacturer and seller of connectors for industries such as smartphones, mobile

phones, communications equipment, automotive electronics

Comparable Transactions : Target BD Comparable Companies : Company BD


Target X

Year $ to €

2012 0.77825

2013 0.75332

2014 0.75370

2015 0.90121

2016 0.90400

2017 0.88720

2018 0.82662

End Market DefinitionsExchange Rates Considered

Appendix

Exchange Rate Conversion

Sources: Oanda

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