The rise of electric vehicles (EV) in recent times has led many investors, including me, to look at EV stocks and those linked to the industry. One UK share I believe could benefit and grow from the EV wave is TI Fluid Systems (LSE:TIFS). Here’s why I like the shares for my holdings.
Automobile essentials
TI Fluid Systems designs, manufactures, and sells fluid storage, carrying, delivery, and thermal management systems for vehicles. All automobiles require such products to help them operate, therefore the products TIFS’ designs and sells are essential. Demand from automobile makers should help boost growth in the years ahead.
As I write, TIFS shares are trading for 234p. At this time last year, the shares were trading for 242p, which is a slight drop of 3%.
UK shares have risks
I must note the risks of investing in TIFS. Firstly, the current semiconductor shortage, essential parts in EV vehicles, has meant there has been a huge backlog of new cars not being produced. This could affect revenues and performance ahead. In addition to this, the current supply chain crisis has affected the TIFS share price and recent performance, despite decent demand for products.
I view both of these risks as short- to medium-term issues that could hinder TI Fluid Systems investment viability. I invest for the long term so these issues don’t worry me too much, but I will keep an eye on developments.
Why I like TIFS
TIFS could be well placed to benefit due to its products being essential in all cars, especially in EVs. Electric vehicles especially, require more of the products that TIFS designs as they don’t operate with the traditional combustion engine.
According to recent stats compiled by Heycar.co.uk, the EV market is booming. Sales increased by 186% in 2020 and, as of today, there are an estimated 370,000 EVs on the road in the UK. There are also 710,000 plug-in hybrids. Growth in the years ahead, in the UK alone, is to accelerate due to the ban on new petrol and diesel cars being manufactured after 2030. The UK government has also invested in many new charging points throughout the country too. It is predicted EVs will outsell petrol and diesel vehicles by the end of 2022.
TIFS shares currently look cheap with a price-to-earnings ratio of just 19. In addition to this, the shares offer a dividend that would make me a passive income from my holdings. UK shares that make me a passive income are firmly on my radar. TIFS sports a dividend yield of just over 2%.
Finally, recent and historic performances has been good, although not a guarantee of any future performance. Looking back, prior to the pandemic-affected year of 2020, revenues were consistently above £3bn for three years. Coming up to date, a post-close update released yesterday, confirmed revenue for 2021, the year ending 31 December 2021, should be above £3bn, up from 2020 levels.
Overall, I think TI Fluid Systems could be a good UK share for my holdings. At current levels it looks cheap, and has a good track record of performance. Most importantly for me, its products are essential to the advancement of the burgeoning growth market that is EVs.