Belden BUY Target Price $75

BDC : NYSE : US$65.58
BUY 
Target $ 75

COMPANY DESCRIPTION:
Belden produces and sells a comprehensive portfolio of
connectivity and networking products into a variety of
markets, including industrial, enterprise, and broadcast

Transportation and Industrials — Industrial Technologies
THE GRASS (VALLEY) IS GREENER;
MAINTAIN BUY, $75 TGT
Investment recommendation
Our thesis stays intact, as Belden continues to perform despite a variable
demand environment. Migration towards higher margin areas
(Broadcast, Industrial IT) stays successful, while a reinvigoration of the
Enterprise business offers enhanced margin opportunity. Maintain BUY.
Investment highlights
 The deal to add ~$300M in accretive Broadcast business (~$0.50/yr)
overshadowed an overall solid quarter, as a resilient portfolio and
robust operating strategy (including share gains) keep margin
growth in tact despite unexpected lumpiness (e.g. Brazil).
 Grass Valley (close Q2E) adds complementary
switches/servers/camera systems to the portfolio, along with clear
in-sourcing and sales synergies. The balance sheet stays robust
(FCF ~$200M for the year), with cash ($613M) and credit line
supporting the ~$220M Grass Valley purchase (~9x EBITDA) and
additional strategic M&A (“dry powder” ~$600M+), as well as
accretive buyback ($130M available).
 F2014 guidance is reiterated, while the pending acquisition of Grass
Valley looks to contribute an incremental ~$225M/$0.20 (in our
new ‘14E numbers). Our revenue/adjusted EPS estimates change to
reflect reported results and Grass Valley. F2014 to $2.35B/$4.20
from $2.14B/$4.00. We introduce F2015 at $2.5B/$5.00.
Valuation
Our 12-month target of $75 equates to P/E and EV/EBITDA multiples of
~15x/~10x our ‘15 estimates, respectively.

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