Deutsche Bank Initiates Coverage On Metaldyne Performance Group

Deutsche Bank on Wednesday initiated a Buy rating on Metaldyne Performance Group Inc (NYSE: MPG).

Analysts at Deutsche Bank wrote, "Suppliers have gained pricing power, and margins (EBITDA margins and EBITDA minus Capex margins) are now among the highest in the Auto Parts Industry. We believe that these above average margins should be sustainable for the foreseeable future, largely because of the challenges involved in bringing on more capacity (the segment is very capital intensive, specialized manufacturing equipment is not readily available, permitting can be a challenge, and it is typically not practical or economical to import highly engineered cast and forged components)."

Metaldyne Performance Group will also benefit from regulations requiring improved fuel efficiency for newly produced vehicles. Automakers will have to use components that are smaller and stronger than what they are using now to lower the weight of their automobiles. Deutsche Bank believes that Metaldyne, with a reputation for high quality products, is in a great place to take advantage of this situation.

Metaldyne Performance Group closed Tuesday at $17.03.