Phinia Inc

PHINIA, Inc. (PHIN) also traded higher following a solid quarterly update, as revenue beat expectations and growth persisted across key regions and end markets. Strong organic performance, particularly in Asia and the Americas, and commercial wins, reinforced confidence in the company’s diversification strategy. Record free cash flow and continued capital returns also underscored the strength of the business model. In our view, PHIN is a diversified and high-quality earnings story, supported by growth in alternative fuels, aerospace and defense, as well as aftermarket expansion. We believe its ability to convert innovation into production wins, combined with disciplined capital allocation and improving margins, positively positions the company for the future.

Phinia Inc. (PHIN) is an auto parts company that has been unfairly valued by the market, particularly following its spin-off from Borg Warner. The company operates in a three-player oligopoly controlling 80%-90% of the market share, and it has gained market share due to a competitor's reduced focus on this category. PHIN's after-market business, which constitutes about 40% of its revenues, is expected to grow steadily, providing a stable revenue stream. Management has also implemented cost-saving initiatives and is actively buying back stock, indicating confidence in future profitability. Despite these strengths, PHIN is trading at a modest 6x EV/EBITDA, which we believe does not reflect its true value as it transitions towards higher-margin segments.

Phinia Inc. (PHIN) is an auto parts company that has been unfairly viewed pessimistically by the market. Following its spin-off from Borg Warner, PHIN has shown strong insider buying, indicating confidence in its future. The company operates in a three-player oligopoly controlling 80%-90% of the market, with potential market share growth from 15% to 20% by 2030. PHIN's after-market business, accounting for 40% of revenues, is expected to grow steadily, and management has implemented cost-saving initiatives to enhance margins. Despite these strengths, PHIN is trading at a low 6x EV/EBITDA, suggesting significant upside as its market perception shifts.

Despite relatively weak end markets this year, Phinia (PHIN) has been resilient thanks in part to the stability of their aftermarkets business. EBITDA is expected to be flattish this year and return to mid-single digit growth in 2026. The company is trading at about 5.5x forward EBITDA and ~10x FCF, which is cheap on both an absolute and relative basis. Phinia has made a concerted effort to shift coverage from auto analysts to industrials analysts, which could help improve sell-side valuations. Additionally, they have already bought back ~19% of the shares outstanding since the spinoff, indicating strong capital allocation.