The company currently prioritizes productivity gains, operational efficiency and cash flow instead of capturing growth like MG did a few years ago. The growing EVs represent both risks and opportunities for MG, as growing demand for EVs and significant investment for OEMs could drive the increasing outsourcing to suppliers like MG. At the same time, MG also faces the risk of long-term displacement of some mechanical products that are permanently replaced by electrified solutions. In addition, the new customer base of early start-up electrified OEMs represents a significant counter-party risk for MG. In 2024, the company wrote off investments the company allocated to support the growth of the Fisker account, which recently went bankrupt. The current market conditions in MG operations remain highly uncertain, MG expects the company to resume its growth trajectory in FY2026. That being said, MG has a high exposure to the trade war and could be directly affected by the U.S.’s tariffs policy, making MG’s prospects appear as uncertain as ever. MG remains one of the most well-managed, shareholder-friendly companies in the auto component industry. That being said, to remain conservative given a variety of headwinds, we are downgrading the company by one notch to ‘B’.

NPI is expected to enjoy meaningful tailwinds in its business model, given that global energy consumption is expected to grow by low single-digit consistently over the long term. This growth is due to a growing demand for renewable energy to tackle climate change. The recent operating results were not promising, given the decline in both adjusted EBITDA and Free cash flow per share, which explains the pressure on its share price. That being said, the guidance and positive catalysts, including stabilized inflation, declining interest rates and large projects that are expected to achieve full commercial operation later in 2025, could improve future operating results. NPI has a healthy pipeline of growth projects, which were funded through a combination of debt issuance and internally generated cash flow. NPI is a stable dividend payer that offers a “bond-like” yield for income-seeking investors. Despite unimpressive recent operating results, we are maintaining our rating for NPI at ‘B’ for now but we would be open to a downgrade if the company does not improve the fundamentals over time.

TVK continues to be a great serial acquirer in the energy sector. TVK possessed a solid track record of value creation and best-inclass capital allocation. TVK has been one of the best-performing stocks in the Canadian market in the last 10 years. That being said, there have been changes in terms of capital allocation in recent years. The company recently issued shares and raised dividends meaningfully, which TVK has rarely done in the past. This could indicate that management believes TVK’s valuation is not as attractive as it used to be. Fundamentally, we believe TVK will do just fine. However, investors need to temper expectations as the share price performance over the next five years may not do as well as the last five years due to a higher starting valuation multiple. We think the story of TVK as a long-term compounder is still intact. We are maintaining our rating at “B+.”