Quick Value #295 - Aptiv RemainCo (APTV)
A look at RemainCo side of upcoming Aptiv spin-off + a lifetime subscription promo
Quick Value
Aptiv (APTV) — RemainCo
Ticker: APTV
Shares: 216m
Market cap: $16.6bn
Valuation: 10x pre-split 2025 EPS ($7.70)
Theme: spin-off (RemainCo)Background
Aptiv is on a mission to shed their ICE-exposure and, with it, their traditional auto parts multiple (stock currently trades at 10x EPS).
In 2017, Delphi Automotive (now Aptiv) spun off their powertrain business which was eventually acquired by BorgWaner, and then later spun off as PHINIA.
Since 2017, Aptiv grew revenue from $12.9bn to $20bn (a ~6% CAGR) and EPS from $4.64 to $7.70 (6.5% CAGR). It’s a GARP idea at a value price.
In 1Q26, Aptiv will wrap the next phase of their journey by shedding the lower margin ICE-exposed wire harness business, Cyprium (known as EDS internally). It has ~10% EBITDA margins vs. RemainCo’s at 19%.
The beauty is that you’re paying a middle-of-the-pack auto supplier multiple for the combined business at today’s $77 per share (again, 10x 2025 EPS estimate of $7.70).
What will RemainCo look like?
RemainCo “New Aptiv” will have 2 businesses.
The first sells safety and infotainment products (radars, cameras, ADAS software, cockpit controls, etc.). This segment is $5.8bn of $12.5bn combined revenue and has ~15% EBITDA margins.
The second division (and the likely crown jewel here) is engineered components which makes connectors and cable management products. This has a big chunk of non-automotive revenue and looks more like a high-margin industrial business with ~22% EBITDA margins.
What are the numbers?
New Aptiv expects to finish 2025 with $12.4bn revenue (24% from non-automotive end-markets), $2.3bn EBITDA (19% margin), $5.50 in EPS, and $1bn FCF ($4.60 per share).
I think SpinCo is likely to trade at $12-13 per share, leaving RemainCo trading around 12x earnings or lower.
There are 2 parts to this bet:
Multiple re-rating (a 20% EBITDA margin business probably deserves to trade at a premium to a 10% margin business)
Multi-year organic growth (GARP)
Management’s “value creation framework” includes:
4-7% revenue growth (mostly mid-teens software growth and HSD non-auto growth)
200bps of combined margin expansion (from 19% EBITDA margins to 21% by 2028)
Mid-teens EPS growth (starting at $5.50 per share, it works out to $8 by 2028) and that excludes any capital allocation
$4bn cumulative FCF from 2026-2028 (~29% of an estimated $14bn market cap)
What could this mean for the stock?
Let’s say a growing and higher margin business such as New Aptiv deserves to trade at 13-14x earnings instead of 10-12x; seems reasonable.
Then let’s say management is capable of growing earnings from $5.50 to $8 per share by 2028 (that’s $540m of net income improvement using a flat 216m share count).
Now let’s spend part of the $4bn cumulative FCF on share buybacks; call it $2bn at $80-100 per share? Let’s just use 20m as the total share count reduction by 2028. Now I’m at $1.73bn earnings on 196m shares = $8.80 earnings per share.
Sticking with the 13-14x earnings multiple on $8.80 2028 EPS = $115-123 per share.
Granted, this is an optimistic scenario and I haven’t yet vetted management’s plan to grow earnings from $5.50 to $8; I’m simply highlighting the combination of value + organic growth + capital allocation optionality.
For now, a more reasonable fair value estimate might be $75-80 per share. Take the $5.50 2025 EPS figure and grow it by 10% to $6. Using a 12-13x multiple (close to higher margin peers such as GNTX, VC, ALV, and ALSN), that gets you $75-80.
My take is that management should go a step further and sell the ADAS and infotainment businesses so the connectors can trade closer to 20x earnings (comp to Amphenol and TE Connectivity).
Maybe they’ll eventually get there?
Either way, I’ll be watching this one…
Disclosure: no position in Aptiv (APTV)
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