Molex Electronic Technologies LLC

Overview Key strengths Key risks Good position in the highly competitive and fragmented global connector industry. Near-term revenue declines due to cyclical downturn from excess customer inventory in certain end markets. Broad end-market exposure and diverse customer base. Lower profitability than major industry peers because of greater research and development (R&D) and manufacturing spending. Continued operational and financial support from parent Koch Industries Inc. Somewhat acquisitive growth strategy historically. Low leverage of below 1x and good free operating cash flow (FOCF) generation. . The company is experiencing reduced demand this year, especially in the consumer and cloud data center end markets, driven by the reduction of excess inventory held by customers and distributors, as well as ongoing macroeconomic uncertainty. The

...We expect weaker demand to drive a high-single-digit percent revenue decline in 2023 with a potential return to low-single-digit growth in 2024. The company is experiencing reduced demand this year, especially in the consumer and cloud data center end markets, driven by the reduction of excess inventory held by customers and distributors, as well as ongoing macroeconomic uncertainty. The company thus reported an 8.6% year-over-year revenue decline in the first six months of 2023, and we expect this weaker bookings trend to continue, leading to a full-year revenue decline in the high-single-digit percent area. Nonetheless, we expect demand in the automotive end market to hold up better due to the wider adoption of vehicle electrification, resulting in a less negative impact on revenue in the Transportation and Innovation segment. We also expect the inventory correction to start to stabilize in 2024 such that the company experiences flat to low-single-digit percent total revenue growth, with...

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