Harman Receives Additional Contract - Analyst Blog
14 Aprile 2011 - 12:30PM
Zacks
A developer of audio products and
electronic systems, Harman International Industries
Inc. (HAR) announced that it has won an additional
contract from Volkswagen AG
(VLKAY) to provide premium high
infotainment solutions for Volkswagen Group brands including Audi,
SEAT, Skoda and Volkswagen for Asian markets beginning 2013.
Previously, in the second quarter
of 2011 (ended December 31, 2010), Harman received a $1.2 billion
contract from Volkswagen Group to provide high infotainment
solutions for the Group’s vehicles in the U.S and European markets.
Including the recent contract, total order value from Volkswagen
Group amounts to $1.6 billion.
Harman will deploy its new
multimedia-driven system in the above-mentioned vehicles, which
offer dynamic navigation, brilliant graphics and internet access.
An embedded flash memory will provide dynamic navigation data for
current access to routes and road information as required.
The new award reflects Harman’s
continued dominance in the automobile infotainment market. In the
past 12 months, Harman has won a number of contracts from
automobile industry bellwethers such as Toyota Motor Corp.
(TM), Chrysler Group, Fiat and Daimler
AG.
However, the company’s automotive
revenue declined 1.0% (up 5.0% excluding foreign currency effects)
to $664.0 million primarily due to unfavorable foreign currency
impact and the divestment of the portable navigation device
business (PND). Including PND, revenue would have increased 6.0% in
the quarter. We believe the company’s strong backlog will drive
top-line growth over the long term.
Harman is also introducing new
technologies in the automobile infotainment market. In the second
quarter, Harman signed a partnership with Sierra Wireless to bring
fourth generation (4G)/LTE connectivity to automobiles. This will
boost Harman’s backlog over the long term.
Harman remains focused on achieving
profitable growth, both organic and inorganic. Harman optimism
regarding its long-term performance is based on increasing demand
for its products, mainly in the emerging markets of Brazil, China,
Russia and India. Harman anticipates revenue of around $1.0 billion
from China by 2015.
Recommendation
We maintain our Neutral
recommendation on a long-term basis (6-12 months). We believe that
strong growth from emerging markets, particularly Brazil, India and
China will drive top-line growth going forward.
Harman continues to face tough
competition from Bose Corp., Boston Acoustics
Inc., Pioneer Corp., Yamaha Corp., Rockford Corp.
(ROFO), Panasonic Corp.
(PC) and Sony Corp.
(SNE), which may hurt its profitability
going forward.
Currently, Harman has a Zacks #3
Rank, which implies a Hold rating on a short-term basis (1-3
months).
HARMAN INTL IND (HAR): Free Stock Analysis Report
PANASONIC CORP (PC): Free Stock Analysis Report
SONY CORP ADR (SNE): Free Stock Analysis Report
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
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