with multiple tailwinds at their back, it’s perhaps little wonder management teams were in buoyant
mood at our Geneva auto conference last week. Excitement is building on prospects for the
European market recovery, and EM fears are gradually receding (for now). We increase our TPs
for PSA (+), FCA (+), RNO (=), DAI (=) post the conference – but all for different reasons.
* The themes that stood out: EU confidence, still-weak tyres, M&A
The dominant theme in Geneva this year was one of rising confidence in the strength of the
European recovery, where the clear message is that the start to 2015 has surprised to the upside,
leaving current EU volume expectations of 1-3% looking very conservative (Exane +4.4%).
However, tyre volumes look set to remain weak in the passenger, truck and mining divisions for the
bulk of H1. Meanwhile M&A has clearly moved up the agenda in 2015, with bolt-on acquisitions
targeted by suppliers, and mega-mergers speculated for OEMs.
The stocks that stood out: Faurecia (+), FCA (+), Michelin (-), PSA(+), VW (+)
While all 15 corporates at the conference had a story to tell, five stood out: 1) PSA, where input
cost and finco tailwinds may be overlooked; ii) FCA, where Ferrari valuation expectations keep
rising; iii) VW, where the all-important auto business seems to be performing well; iv) Michelin,
where net pricing relief may not be evident until H2; and v) Faurecia, where margin expectations
may still be too low. Full detailed notes are included inside this note.
Upgrading estimates & TPs at FCA, PSA, RNO & Daimler
We also use this note to update our estimates and TPs for a number of OEMs to reflect i) stockspecific
insight from the conference; ii) the latest FX rates; and iii) a cut to our Brazilian FY market
forecast (now -10%). This means we hike our TPs at PSA (+) to EUR19.0 (higher 16’e auto
margins); at FCA (+) to EUR16.5 (Ferrari now at EUR8.6bn EV); at RNO (=) to EUR95 (higher cost
savings); and at Daimler (=) to EUR92 (marking to latest FX spot). We hiked our BMW (-) TP to
EUR108 earlier this week (FX), and will update our VW (+) model post the release of detailed FY
results on Thursday.
--> Comnet on Peugeot :
– M&A: As sector balance sheets improve, discussion focused far more on M&A than
in prior years. PSA management were open minded regarding the possibility of a future
merger, but of course stopped well short of commenting on the speculation of the tie-up
with FCA that dominated our discussions with investors (we see the two as a good
potential fit). We also note with interest that the topic of the Renault-Nissan Alliance
structure is starting to again become a bigger topic in Renault meetings. Shorter-term
however, M&A activity is more likely in the supplier space, where most remain on the
lookout for non-organic growth opportunities.