US Electrical Equipment & Multi-Industry: EE/MI Morning Note - Initiating coverage on INIO, June ISM preview

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US Electrical Equipment & Multi-Industry: EE/MI Morning Note - Initiating coverage on INIO, June ISM preview

Valuation Method and Risk Statement

Valuation: We use a combination of relative P/E, EV/EBITDA, and EV/sales to determine our

price targets for 3M, Ingersoll Rand, and Stanley, Black & Decker. Our price target for DOV is

based on relative P/E methodology. Company specific risks includes capital allocation vis a vis

multiple paid and / or management execution The outlook for various Dover end markets also

poses risk to organic growth and margins.

Risk Statement: The Electrical Equipment and Multi-Industry sector faces a broad range of

risks. It is cyclical in nature with exposure to the underlying cycles inherent in everything from

aviation, auto, trucking and trains to construction and consumer electronics to mining,

power, oil and gas and more depending on the specific stock. EE/MI companies are subject to

risks associated with unexpected changes in the underlying global macro environment,

currency and interest rate movements, commodity price inflation as well as company-specific

execution, M&A, integration, labor relations and changes in the competitive or regulatory

environment. These changes can be in the form of product technology, ecommerce and other

digital disruption and/or channel disintermediation. Changes in the overall macro

environment can result from health emergencies such as COVID-19 and other pandemics.

Capacity and related pricing pressures are also a risk through the cycle. Finally, these

multinational companies are subject to policy changes taking place in the United States and

internationally, including those related to environmental regulation and tariffs.

We value INIO using EV/EBITDA multiple. Company specific risks include slower than