Renault: Credit Suisse remains neutral and raises its price target – 10/25/2022 at 11:45 am

(AOF) – The recommendation of the broker Credit Suisse regarding Renault remains Neutral for a high target price of 33 euros. The manufacturer’s strong ability to increase its prices (“pricing”) supported the automaker’s revenues in the third quarter of 2022.

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key points

– Fourth largest car manufacturer in the world, created in 1898 and present under the brands Renault, Dacia, LADA, Alpine and Mobilize;

– Global industrial positioning, with a turnover of 46.2 billion euros achieved in more than 50% outside Europe and with strong positions mainly in the following countries: France, Italy, Turkey, Spain, Belgium-Luxembourg, Romania, Morocco and Poland;

– Business model: repositioning in medium-sized vehicles, in the quality of the offer in electric or hybrid vehicles and flexible services;

– Capital held at 15% (29.05% of voting rights) by the French State, 15% by the subsidiary Nissan and 3.61% (5.88%) by employees, with the 17-member board of directors being chaired by Jean-Dominique Senard, Luca de Meo as CEO;

– Balance sheet strengthened with net debt reduced to €426 million, cash reaching €15.8 billion.

Challenges

– 3-step “Renaulution” strategy, the objectives of which will be updated in autumn 2022: resurrection by 2023: brand autonomy, platform rationalization from 6 to 3, “mid-range” offer increased to 40% of revenue against 15%, operating margin of +3%, free self-financing of 3 billion euros/renewal from 2023 to 2025 for renewal of ranges/renovation: ramp up of the use of hydrogen in professional vehicles with a target of market share of 30% in 2030;

– Innovation strategy focused on connectivity, services and electric vehicles: network of experts, innovation labs (California, France, Israel), ReKnow University dedicated to electrification, data cybersecurity, etc. / partnerships: CEA and the competitiveness clusters Moveo, Sysematic and ID4Car / NeVeOS project for vehicle electronics architecture / E-TECH hybrid technology and French carbon-free batteries / Renault Venture Kapital and Alliance Ventures investment funds for venture capital and support to start-ups;

– Environmental strategy aiming for carbon neutrality in 2040 in Europe and in 2050 in the world: target of a range of all-electric private vehicles in Europe by 2030 through 23 billion euros of investments by 2027 and 5 common platforms / circular economy mobility driven by the Flins plant;

– Positive effect of the product mix for revenue with the launch of Arkana, Jogger and Mégane Electric;

– Towards the spin-off of the electrical and software activities, which would be listed on the stock exchange, and the thermal traction activities.

Challenges

– Impact of the semiconductor shortage: loss of 300,000 vehicles in 2022;

– Impact of raw material inflation offset by trade policy;

– Impact of the Russia-Ukraine war: net loss of €2.3 billion with discontinued operations, but debt reduction;

– Operational launch of Mobilize, bringing together mobility, energy, financing, insurance and maintenance services, targeting 20% ​​of sales by 2030;

– After stable turnover and a tripling, excluding the Russian impact, of net income by 1

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H2022 targets revised upwards: operating self-financing of +€1.5 billion and operating margin of +5%.

a paradoxical performance

EY data highlights that the performance of the world’s 16 largest manufacturers was particularly strong in 2021. Although the average margin has fallen for three years in a row, from 6.3% in 2017 to just 3.5% in 2020, this margin was 8 .5% in 2021. This level is a record for ten years. However, the context has been particularly hectic for manufacturers, faced with an unprecedented shortage of components. Global sales dropped 14% in 2020, the year of the health crisis, to recover just 5% in 2021. However, last year, players were able to reap the benefits of their efforts in their fixed cost structure.

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