Sevcon (SEV $4.25) reported unexceptional Q1 results. The company is a leading independent supplier of controls for electric and hybrid vehicles. The systems take directions from the driver and make the engine respond, maximizing efficiency and power. Sevcon has a long history in the work machine market. That segment fell on hard times last year when demand for mining and construction equipment declined. Electric forklift truck demand slipped in the March period, as well. Part of that is believed to the result of a shift towards natural gas powered trucks. Sevcon entered the on road electric vehicle segment a few years ago via a relationship with Renault. The company provided the controls for the 2-seat Twizy city car that Renault introduced, initially to relatively strong demand. Weak economic conditions in Europe subsequently caused volume to slide, though, and that trend continued in Q1. Off-road electric motorcycles and ATVs remained solid.
Sevcon responded to the slowdown last year by moving into the hybrid controls segment. That effort hasn't resulted in large production runs yet. But several programs are believed to be in the pipeline. Sevcon's new Gen-4 system is geared primarily for the hybrid market. The company also has beefed up marketing efforts in northern Europe, where the economy remains sound. And pick-ups appear to be underway with the Renault and forklift truck lines. Results probably will improve modestly over the next 1-2 quarters as the new opportunities reach fruition. Significant gains are possible beyond. Electric vehicle demand could advance in the wake of Tesla Motors' recent success. The move into hybrid applications offers even greater potential. Our 2014 estimates may prove ambitious. But it won't take much to get earnings moving since only 3.35 million shares are outstanding.
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