Stellantis shares outperform the market (Ftse Mib + 0.42%) with an increase of 2.13% to € 17.426 in the aftermath of the first half-year accounts, better than analysts’ expectations, even net of accounting exchange rates which reduce D&A on an annual basis of 2 billion euros, and the 2021 guidance raised. The synergies deriving from the merger between FCA and PSA also turned out to be higher than expected: in the first half already € 0.6 billion.
Equita Sim could not help but observe North America, “still the best performer with sales + 42% at 32.4 billion and Ros adjusted at 16.1%, an historic peak” and focused on the price effect (in first half over 3 billion on EBIT) considered only partially structural because it is facilitated by the demand / supply imbalance generated by the shortage of components. “The low stocks in the network: -30% in the first half to 882 thousand, still guarantee a good visibility in terms of volumes / prices for another 12-18 months”, specified the SIM, not worried about the negative free cash flow in the first half-year: 1.2 billion penalized by the absorption of net working capital (3.3 billion) due to the loss of production of 700 thousand vehicles (20% of the total) due to the lack of chips. In any case,
Instead, the adjusted EBIT target has been raised to around 10% compared to a previous forecast between 5.5% -7.5% despite the likely impact of the semiconductor shortage (which management, however, does not see worsening. in the third quarter and stabilize in the fourth) and raw materials (2.55 billion more than in 2020. In the second half it is seen at 8-9% against 11.4% in the first half as management discounts less synergies, lockdown risk and chips.
“The improvement in guidance is consistent and, on the basis of the data of the first half of 2021, both our estimates and those of the consensus, which point, respectively, to 11.1 billion and 11.3 billion of adjusted operating profit are conservative. , we underline that, while implying a lower adjusted ebit in the second half of the year, we consider the group’s objectives to be more than reasonable and even potentially a bit conservative if we consider that Stellantis has improved its market prospects in the NAFTA area, now seen to grow 10% compared to the previous 8% “,underlined Intesa Sanpaolo (rating buy and target price under review) for which most of the cautious position of the group on the second half of the year is attributable to the low visibility on the availability of semiconductors and their impact on production rates.
Within this scenario, however, with retailer inventories at historically low levels, “the group still has room for positive pricing and on the NAFTA area it looks confident it can maintain its double-digit margins going forward. pricing environment needs to be monitored as market conditions normalize, we are confident that Stellantis’ increased market share will support the company in posting double-digit margins in the future as well. ”
Assuming a turnover of 150-160 billion, Equita expects an adjusted ebit of 15-16 billion and after raising the 2021 ebitda estimate by + 7% and adjusted net profit ex accounting exchange rates by + 30%, it has raised the target price on Stellantis stock by + 13% to 23 euros, using a 2.5 times ev / ebitda 2021 multiple against the 3.4 times of European competitors, and confirmed the buy rating.
Banca Akros also raised Stellantis’ target price from 18.4 to 22 euros (rating buy) this morning, after having improved its estimates to take into account the very strong results of the first half. “Our new estimates assume that Stellantis will not have excessive problems related to the lack of chips in the second half of the year and that it will be able to recover part of the production lost in the first with a positive impact in terms of free cash flow,” said Banca Akros. by the end of the year it expects revenues of 163 billion, an adjusted operating profit of 17.35 billion and an adjusted net profit of 14.251 billion.
A few thoughts on how to evaluate Stellantis. “If we apply the industry median 2021/2022 price / profit multiple, equal to 7.1 / 6.7 times, to our new estimates of Stellantis’ net profit, we arrive at a fair value of 27.8 / 28 euros but , considering that the sharp improvement in margins in North America could subside and reverse, we prefer to use a more cautious approach, using the price / free cash flow multiple, “explained Banca Akros. Well, by applying the median p / fcf multiple of the sector, equal to 12.2 / 10.8 times, to our new free cash flow estimates, 4.9 / 7.1 billion, we arrive at a fair value of 19.1. / € 24.5 and therefore we set a new target price at € 22 and maintain our buy recommendation on the Stellantis stock “, concluded Banca Akros.
It is associated with Bestinver Securities (buy and target price under review) according to which the execution of synergies is ahead of expectations, since 40% of the 5 billion target set for 2025 could already be achieved this year. This should allow not only to reach the long-term goal of a double-digit operating margin already this year, but also to confirm it in the coming years despite the increase in costs due to electrification.
“We believe that the effectiveness in the execution of synergies demonstrated in the first half of 2021 will help to reduce the valuation gap of Stellantis compared to the sector”, predicted Bestinver which also expects a significant upward revision of the estimates of the consensus on Stellantis, in how much adjusted EBIT is expected to reach approximately € 15.5 billion and adjusted net profit approximately € 11 billion at the end of this year, both 40% higher than current consensus estimates.
In other words, “Stellantis would currently trade at S / S 2021 of just 4.9 times versus a sector median of 7.5 times, with a potential upside of over 50%. We therefore confirm our rating buy. and we believe that Stellantis is still one of the best choices in the Italian stock market “also in light of a free cash flow yield of 13.8% (sector 10.4%) and the dividend of 4.6% (sector 3.4 %). (All rights reserved)

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