CS top ideas for 2016 Produced
• Autoliv (OP, TP US$135) • Meaningful upside from airbag inflator business – acceleration of organic growth • China (16% of sales) – highest leverage (from low base) to strong China production
• FCA (OP, TP €18.2) • Stub-value attractive at c.2.5x 2016E EV/EBITDA • NAFTA margin improvement key for equity re-rating - our estimates are >20% ahead of the street
• Leoni (OP, TP €43) • Low point reached with limited further downside risk • Cheap valuation may attract some new shareholders who could demand more meaningful changes
Top three Underperforms
• Michelin (UP, TP €79) • Specialty tyres provide material downside risk – we expect SR3 margin to continue to fall throughout 2017 • FX tailwinds fading, which was the main profit driver in 2015
• VW (UP, TP €83) • Commercial impact (market share losses and pricing) underestimated • Risks for Financial Services business underestimated (higher refinancing costs and risk provisioning)
• BMW (UP, TP €82) • Weakening key end markets (Germany, UK, US) combined with high exports c.45% (Europe) put pressure on earnings • We expect automotive margin to fall below 8% in 2016E