ElringKlinger AG (ZIL2.DE) is a German automotive supplier undergoing a strategic transformation from traditional ICE components to electric vehicle (EV) battery technology and lightweight structural parts. The company’s core products now include battery cell contacting systems, thermal management solutions, and lightweight underbody panels for EVs. With a market cap of approximately €1.2 billion, ElringKlinger fits perfectly in the small-to-mid-cap sweet spot of our Electric Vehicle Portfolio.
Investment Thesis
ElringKlinger is poised for a significant re-rating as it capitalizes on the EV megatrend. The company has secured multi-year contracts with major European and Asian automakers for battery components, providing strong revenue visibility. After a period of margin compression due to raw material costs and R&D spending, the company is now entering a phase of operating leverage and margin expansion. The stock trades at a discount to peers, offering a compelling risk-reward.
12-Month Catalysts
- Order Book Conversion: The company’s order intake for EV components has grown 40% YoY, with a backlog of €2.5 billion. Conversion to revenue will accelerate in H2 2026.
- Margin Recovery: EBIT margin is expected to improve from 4.5% in 2025 to 7.5% in 2026, driven by cost savings and higher-margin EV product mix.
- New Contract Wins: ElringKlinger is in advanced talks with two Chinese EV makers for battery housing supply, which could be announced in Q3 2026.
Key Risks
- Automotive Cycle Slowdown: A recession in Europe could delay EV adoption and hurt near-term volumes.
- Raw Material Volatility: Aluminum and copper prices remain elevated, impacting margins if not passed through.
Valuation Summary
ElringKlinger trades at a 2026 P/E of 10x and EV/EBITDA of 5x, a 40% discount to peers like Leoni and Hella. With a target P/E of 15x based on historical average and growth profile, the stock offers 50% upside to €12 per share.
Balance Sheet Summary
Net debt of €350 million (2.5x EBITDA) is manageable. The company has €200 million in undrawn credit lines and no near-term maturities. Free cash flow turned positive in Q1 2026 and is expected to reach €80 million for the full year.
Disclaimer: This is not financial advice. Investing involves risk, including loss of principal. Do your own research.