Posted on Jan 19, 2023, 4:10 PMUpdated on Jan 19, 2023, 4:15 PM
Renault, racing car of the Paris Stock Exchange. The value of the auto maker’s shares has tripled since the low point of March 2020 (x2 for Cac 40), when fears about the Covid-19 pandemic were at their peak. And this is probably the proof that Mrs. Michu doing his market (stock market) is not a bad omen. Because I remember well that around me, when the French in general rushed to the stock market to take advantage of the sales, friends, who had never thought of investing until then, called me to ask me “How to buy Renault shares? »
Beginner’s luck you tell me. More likely, being pragmatic, like Warren Buffett, they put their money in a business they understand. Unlike professionals, in their vernacular slider that looks mounted upside down, not really intuitive for the uninitiated, for whom the deeper the economy sinks into recession, the better it is, because of this statement, the central banks are able to continue to flood the market with liquidity. But, due to inflation, the era of free money is over. The Cac 40 fell by 9.5% last year, while Renault (+2.4%) is one of the only companies in the flagship Parisian index to improve in 2022, the opposite of its profession which, as a whole, compared to the European auto index, has erased 20% of its capitalization.
Renault, throughout the revival, is a cyclical company, which is highly dependent on the state of economic health, but which, on the stock market, is fighting fears of recession and still signed one of the best Cac 40 performances since the beginning of the year (+17%). And, according to financial analysts from the private bank Oddo BHF, the manufacturer still has a lot under the hood to claim that rally 55 euros, which gives hope for an additional gain of 50% in current price of 36.5 euros. “The dynamics remain very favorable”, wrote in a note, sent this morning to the bank’s customers, Michael Foundoukidis and Anthony Dick, specialists in the automotive sector, a day after Renault published its sales figures for 2022. be attractive: in terms of volume, sales of the group that owns the Renault, Dacia and Alpine brands fell by 5.9% in 2022 to reach 2,051,174 vehicles, their fourth year of decline.
Less volume, more profitability
“The publication of the annual volumes yesterday did not reveal any significant surprises […] in the challenging supply and logistics environment last yearaccording to analysts. However, we maintain an increased focus on profitability, which is reflected in the importance given to the channel retail (increased by 9 points to 67% in Top 5 Europe) [les ventes aux particuliers, via les concessions, segment plus rentable que les ventes aux professionnels (voitures de fonction, loueurs), représentent maintenant un tiers des ventes totales], Dacia’s excellent performance (sales up 7%) [la marque Dacia est plus rentable car, justement, moins prisée par les professionnels] or the growth of the Renault brand in the C segment in Europe (sales of 21% compared to the Renault brand which decreased by 9%)”, thanks to the particular enthusiasm for SUVs and the success of the Arkana (80,000 cars of this model will be sold in 2022). “Beyond that, the growth in sales of electric vehicles should also be noted (+12%, now 39% of the Renault mix in Europe)they also argue. Finally, the group also confirmed the very high level of its order book in the 3.5 months at the end of December, especially with its recent launches (16,500 orders for the Austral SUV in two months, 47,500 orders for the Megane E- Tech end of December). »
Renault is, for the financial analysts of the bank Oddo BHF, the company where, in Europe, it is necessary in priority to bet on the automotive segment. In search of“a revival faster than expected”, they became buyers again in October and since then their optimism has only grown. The value first became their “Top Pick” (the “best choice”, in French) of the automotive segment before including, at the beginning of the year, the short list of the best bets, all sectors combined, for 2023 . .
In just two years, Luca de Meo, who took over as CEO of Renault in the summer of 2020, has successfully completed the first phase of the “Renaulution” plan, which mainly consists of reducing costs and carving out the manufacturer in more aggressive ways, so that it can better survive in an environment where sales volumes are lower, directing it towards a strategy focused on value and profitability. That, three years before the initial target of 2025, should result this year, according to the manufacturer’s goals, in an operating margin of more than 5%. Oddo BHF analysts, the most optimistic of forecasters, expect an operating profitability of 5.6%. They expect adjusted operating profit (Ebit) of 2.587 billion euros, up 5%, where the consensus says 2.476 billion.
Flow of upward revisions
Renault will publish its 2022 accounts in just over a month, on February 16. “The publication, in our view, should further reflect the progress made by the manufacturer at the operational and financial levels, while the outlook for 2023 should lead to further increases in expectations and describe the its ability to re-grow its results and improve its performance. . financial situation despite a less favorable macroeconomic context”they expect “Beyond 2022, we are still ahead of expectations with adjusted 2023 Ebit up 30% (3.3 billion euros vs consensus 2.6 billion) and free cash-auto flow almost 40% higher (2.2 billion euros compared to 1.6 billion.)”
opinion “very positive” of Oddo BHF should be put in perspective with a more neutral consensus among analysts, made, according to the register kept by the Bloomberg news agency, of 47.8% of buy opinions, 43.5% of “hold” opinions and 8.7% of sales advice, but Renault’s publication of its 2022 accounts could cause an increase in changes to recommendations, the private bank seems to think. In addition, another catalyst for the manufacturer in the stock market, “Announcements on the arrangement of the alliance with Nissan and Mitsubishi are also expected in the coming weeks (gradual reduction of Renault’s stake in Nissan, Nissan’s stake in Ampère but also and above all the new joint projects industrial between the three partners) and should allow, in our opinion, an improvement in the outlook of its prospects (with a gradual translation of the stock market)”, said analysts at Oddo BHF. By gradually selling its shares to Nissan and accepting the Japanese in the “Ampère” project, a division dedicated to electric cars (with “Kabayo” for thermal cars, a branch in which Aramco should invest as soon as possible), Renault will free up the financial resources necessary to launch its plan and invest in clean models of the future.