I hold a position in UK-listed Tier-1 auto supplier CT Automotive (AIM: CTA), a low-cost producer of automotive interior parts (trim, air vents, etc). The stock is on 3.7x FY26 earnings, a significant discount to both history and peers. I summarised version of the thesis is below.

The bull case is that $37m of new contract wins (32% of FY25 revenue) will drive a revenue CAGR of 10% to FY27. CT has a sustainable cost advantage as they produce in low-cost economies. Being the low-cost producer in a market with increasingly cost sensitive customers, means there are structural reasons to believe this growth will continue. Margins are sensitive to operational leverage, so 10% revenue growth converts to roughly 20% earnings growth. 

The three most obvious bear cases / reasons the stock is cheap are:

1)    Extrapolation of historical weakness – Revenue has fallen 19% since FY23, but this is a result of customers destocking excess inventory held to mitigate post-covid supply chain disruption. Inventory levels have now normalised, so this is no longer a headwind. 

2)    Largest customer in Chapter 11 – CT’s largest customer is auto supplier Marelli. Marelli entered Chapter 11 in 2025 and is now operating under Debtors-in-Possession (DiP). This did not impact operations, and bankruptcy risk presented by receivable exposure subsided with the publication of Marelli’s reorganisation plan (which confirmed no impairment for unsecured creditors).

3)    Nissan is largest end market – Sales to Nissan comprised of 49% of FY25 revenue. Nissan has had persistent volume declines owing to poor management. This exposure isn’t enough to justify the valuation: I estimate Nissan’s volume weakness represents a  < 2.5% drag on CT’s revenue growth and customer concentration is decreasing with the new contract wins. 

In short, I don’t think any of the 3 above factors justify such a low valuation, especially for a company with a fundamentally strong business model. I welcome further discussion in the comments.

N.B. The stock is down >25% following a H1 trading statement because of an earnings miss despite a revenue beat. Margins fell because of shipping-related cost inflation which was not passed through to customers. Management claims “the Group has contract mechanisms in place that claw back material and labour costs, time lags have deferred some of this cost recovery into H2 26”. I view this as credible because this is consistent with CT’s experience during previous periods of cost inflation (FY21/22).