paragon (PGN): Refocused automotive growth strategy

London, UK, 11 August 2022

paragon (PGN): Refocused automotive growth strategy

paragon has spent much of the pandemic refocusing on its core automotive activities and addressing the issue of bond refinancing. Both are now largely complete and management’s revised growth strategy targets ambitious financial targets over the next few years, with a positive start already made. As much of its product portfolio is fuel type agnostic, paragon is well positioned to address the evolving connectivity, digitalisation and electrification requirements of electric vehicles. We believe the strong growth outlook merits a higher FY23e P/E rating than the current 3.6x, which we feel reflects concern over the refinancing of the outstanding CHF21m bond due in April 2023.

Concerns over the CHF bond appear to be weighing heavily on sentiment and the share price rating. A clear path to its redemption next year should help to alleviate the negativity. Our capped DCF valuation based on our reintroduced estimates for the core operations returns a value of €19.6 per share based on the current capital.

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