Investment Review №345. Treasuries vs Stocks
Vadim Merkulov
Head of Analytics department
Investment Idea: Phinia. The Energy of Motion
PHIN shares are worth buying with a target price of $88
About company
PHINIA (PHIN) is a global leader in the development, design, and manufacturing of fuel systems, electrical systems, and aftermarket solutions. Spun off from BorgWarner in 2023, the company operates through two core segments — Fuel Systems and Aftermarket — serving a diversified customer base across commercial vehicles, industrial applications, light vehicles, and aerospace & defense. Backed by over 100 years of manufacturing expertise and industry relationships, and supported by a strong brand portfolio that includes Delphi, Delco Remy, and Hartridge, PHINIA generates strong, recurring cash flows through a combination of mission-critical OEM components and a high-margin aftermarket replacement business, providing operational resilience regardless of broader macroeconomic cycles.
| Ticker | PHIN |
| Share price as of analysis | $75,04 |
| Target share price | $88 |
| Growth potential | 17,3% |
| Share price dynamics vs. indices | Day | Week | Month | Quarter | Year |
| PHIN | (1,3%) | (6,5%) | 2,6% | (1,3%) | 69,8% |
| S&P 500 | (0,1%) | (0,1%) | 3,9% | 7,6% | 24,2% |
| Russell 2000 | (0,7%) | (3,3%) | (0,1%) | 4,4% | 31,3% |
| DJ Industrial Average | (0,3%) | (0,0%) | 0,5% | 0,0% | 16,5% |
| NASDAQ Composite Index | (0,5%) | (0,7%) | 6,6% | 14,7% | 35,8% |
Price dynamics PHIN, $
Key Investment Theses
- Durable cash-generating ICE and hybrid exposure. PHINIA is well positioned in a market where combustion and hybrid powertrains remain essential across commercial vehicles, industrial applications, and large parts of the global vehicle fleet. Unlike pure EV-exposed suppliers, the company benefits from continued demand for efficiency, emissions reduction, and replacement parts in existing ICE platforms, creating a more resilient revenue base through the cycle.
- Strategic diversification beyond automotive. PHINIA is repurposing its core technologies into adjacent high-growth industries. In Aerospace & Defense, the company has secured its second customer and fourth program, winning a jet fuel injector contract for drone engines now entering commercial production. The 2025 acquisition of SEM gave PHINIA a first-to-market position in off-highway alternative fuel ignition systems, opening the agricultural and construction equipment markets. Additionally, new CNG fuel rail wins in India, ethanol programs in South America, and direct injection contracts in China are expanding the company's geographic and end-market reach, materially reducing reliance on light-duty passenger vehicles.
- Aggressive capital returns and disciplined allocation. Since its 2023 spin-off, PHINIA has repurchased ~$492 million in shares (~23% of the original count) and paid $120 million in dividends. The Board expanded the buyback program to $750 million and raised the dividend by 11% in early 2026. With adjusted EPS up 37%+ year-over-year in Q1 2026, 2026 free cash flow guidance of $200–$240 million, net leverage of only 1.4x, and a long-term organic revenue target of $4.2 billion by 2030, the capital return program is well-funded and drives powerful per-share earnings accretion.
We set a target price for PHIN at $88 with a “Buy” recommendation. A stop-loss is advised at the $66 level.
| Ratio Analysis | 2023A | 2024A | 2025A | 2026E | 2027E | 2028E | 2029E | 2030E |
| ROE | 6% | 5% | 8% | 12% | 13% | 13% | 16% | 15% |
| ROA | 3% | 2% | 3% | 5% | 5% | 5% | 6% | 7% |
| ROCE | 9% | 10% | 10% | 12% | 13% | 16% | 17% | 16% |
| Sales/Assets (x) | 0,87x | 0,90x | 0,91x | 0,95x | 0,97x | 0,98x | 1,13x | 1,07x |
| Margins, % | 2023A | 2024A | 2025A | 2026E | 2027E | 2028E | 2029E | 2030E |
| Gross Margin | 21% | 22% | 22% | 22% | 22% | 22% | 22% | 22% |
| EBITDA Margin | 12% | 13% | 12% | 14% | 13% | 13% | 13% | 13% |
| Net Margin | 3% | 2% | 4% | 5% | 5% | 5% | 6% | 6% |
| Financials, $mln | 2023A | 2024A | 2025A | 2026E | 2027E | 2028E | 2029E | 2030E |
| Revenue | 3 500 | 3 403 | 3 483 | 3 649 | 3 743 | 3 819 | 3 946 | 4 035 |
| COGS | -2 776 | -2 647 | -2 721 | -2 841 | -2 910 | -2 969 | -3 064 | -3 133 |
| Gross Income | 724 | 756 | 762 | 808 | 833 | 850 | 882 | 902 |
| G&A | -413 | -442 | -445 | -458 | -468 | -478 | -494 | -505 |
| R&D | 420 | 430 | 422 | 500 | 505 | 513 | 529 | 540 |
| EBITDA (adj.) | 143 | 132 | 127 | 130 | 127 | 130 | 132 | 137 |
| Interest expense (income) | -43 | -83 | -67 | -67 | -63 | -65 | -20 | -28 |
| Pretax Income | 206 | 187 | 198 | 272 | 285 | 291 | 352 | 353 |
| Income Taxes Paid | -104 | -108 | -68 | -89 | -91 | -93 | -113 | -113 |
| Net Income | 102 | 79 | 130 | 183 | 194 | 198 | 239 | 240 |
| Dilluted EPS | $4,19 | $3,86 | $4,96 | $6,04 | $6,72 | $7,46 | $9,50 | $9,53 |