Shinhan Investment & Securities on the 4th said news that Doosan Bobcat will acquire a German construction equipment manufacturer is a positive strategic shift regardless of whether the deal happens. Doosan Bobcat's previous closing price was 59,300 won.
A media report on the previous day said Doosan Bobcat is pushing to acquire the German construction equipment specialist manufacturer Wacker Neuson. Doosan Bobcat said in a filing that it is "under review, but nothing has been decided."
Wacker Neuson, a German corporations founded in 1848, listed on the Frankfurt securities exchange in 2007. Like Doosan Bobcat, it focuses on small construction equipment products and has a lineup suited for urban construction, remodeling, landscaping, and small-scale work.
Last year's sales came to €2.24 billion (about 3.8 trillion won). Sales in the third quarter of this year were €550 million, with operating profit of €40 million, for an operating margin of 7.5%.
Lee Dong-heon, a researcher at Shinhan Investment & Securities, said, "Wacker Neuson has a full lineup of small equipment like Doosan Bobcat," and explained, "Unlike Doosan Bobcat, whose main products are loaders (SSL, CTL), Wacker Neuson focuses on telehandlers and compact wheel loaders."
Wacker Neuson is being mentioned for acquisition at a 5 trillion won valuation. Lee said, "Acquiring the 63% controlling shareholder equity for 3 trillion won is expensive versus Doosan Bobcat's market cap, but reasonable considering a control premium," adding, "Doosan Bobcat's market value is discounted compared with peers."
The small construction equipment market is centered on developed markets, with Europe the largest after North America. Lee analyzed, "Doosan Bobcat's sales mix is roughly 70% North America, 20% Europe, and 10% others, and this is a good move to target the European market."
Lee said it is "a positive strategic shift regardless of whether the acquisition happens," noting, "While the company has steadily expanded its business, it has been cautious about large-scale mergers and acquisitions (M&A) despite ample cash equivalents."
Lee said a moment of strategic growth is needed as the North American market peaked after the coronavirus pandemic. Lee analyzed, "After the 2024 governance restructuring and the aborted ordeal, merely signaling investment possibilities for Doosan Bobcat is the starting point for narrowing the discount."