Company Reports

Our views on the predominantly mass-market European automotive original equipment manufacturers Renault, Stellantis, and Volkswagen are unchanged following a transfer of analyst coverage. We maintain our no moat ratings for all three firms with our fair value estimates reflecting significant upside. We increase our fair value estimate for Renault to EUR 85, while our fair value estimates for Stellantis and Volkswagen decrease to EUR 32 and EUR 264, respectively.

The three-phased "Renaulution" strategy was launched in 2021 after the company reported a loss of over EUR 8 billion in 2020 and lost its investment-grade status. The execution has been excellent so far. Return on invested capital, however, still falls below their weighted average cost of capital.

In difficult trading conditions, Renault’s automotive division, which accounts for 90% of group revenue, delivered a solid set of results. However, shares sold off on results failing to meet consensus expectations and an ongoing poor performance from its associate, Nissan. We think this is an overreaction as there are a number of one-offs in this bottom-line figure. We are maintaining our fair value estimate at EUR 67 per share, however, we will be reviewing our forecast to incorporate the latest results from Nissan and the numerous divisional unbundlings currently underway at Renault

No-moat Renault reported first-quarter group revenue of EUR 11.7 billion, up 5.9% in constant-currency terms from the prior year and a touch ahead of FactSet consensus. The top-line beat was partly driven by strong performance from Renault’s financial services business, up 30.7% year on year in constant currency, derived from higher interest rates. Automotive, which accounts for 90% of group sales, saw revenue fall 0.7% compared with the same period last year. Strong pricing, which contributed 4.1% to the segment, was more than offset by the negative 4.7% attributed to currency headwinds, with the devaluation of the Argentinean peso singled out by management. In constant-currency terms, automotive grew 3.6%. While registrations increased by 2.6%, destocking from independent dealers contributed to a negative 4.6% volume effect on automotive segment sales year on year. Renault reiterated full-year guidance of at least EUR 2.5 billion free cash flow and at least a 7.5% operating margin. With 10 new model launches planned for 2024 across the group and a strong order book at 2.5 months, we believe these targets are achievable despite the macroeconomic backdrop. The French automaker discloses only revenue in the first and third quarters, while full financial statements are reported for the half and full year. With no changes to our forecasts, we maintain our fair value estimate of EUR 65.

Renault directly and indirectly owns 40.4% of Nissan, while Nissan owns 15% of Renault and 34% of Mitsubishi. Under the new alliance agreement, Renault transferred 28.4% of Nissan shares into a French trust, retaining a direct 15% stake. The trust sells shares under Renault's direction but there is no time limit applied. After Renault sold a 5% Nissan stake to Nissan and Nissan subsequently retired the shares, the trust now holds a 24.6% stake while Renault's direct holding is 15.8%. Nissan shares received voting rights with the new agreement. Voting rights of the Renault and Nissan-owned cross-shareholdings are capped at 15%. In addition, Renault owns 99.4% of Romanian automaker Dacia, and 80.0% of South Korean Samsung Motors.

No-moat-rated Renault reported very strong full-year 2023 earnings, increasing sales over 13% year over year while generating record operating margins and free cash flow. The French-listed shares reacted positively to results, up over 6.5% on Feb. 15 as the report provided further evidence that management will be able to execute against its previously outlined “Renaulution” turnaround plan. Shares trade at a compelling 55% discount to our unchanged EUR 88 per share fair value estimate.

No-moat-rated Renault announced that it canceled the IPO of Ampere, its battery electric vehicle and software operating unit. Management says that it decided not to progress with the IPO because Renault group cash flow looks better than previously expected (but gave no figures) so raising capital was no longer needed. Management also said that agreements with Nissan, Mitsubishi, and Qualcomm would still allow them, if they choose so, to invest in Ampere.

Renault directly and indirectly owns 40.4% of Nissan, while Nissan owns 15% of Renault and 34% of Mitsubishi. Under the new alliance agreement, Renault transfered 28.4% of Nissan shares into a French trust, retaining a direct 15% stake. The trust sells shares under Renault direction but there is no time limit applied. After Renault sold a 5% Nissan stake to Nissan and Nissan subsequently retired the shares, the trust now holds a 24.6% stake while Renault's direct holding is 15.8%. Nissan shares received voting rights with the new agreement. Voting rights of the Renault and Nissan owned cross-shareholdings are capped at 15%. In addition, Renault owns 99.4% of Romanian automaker Dacia, and 80.0% of South Korean Samsung Motors.

No-moat-rated Renault presented its investment case for Ampere, its electric vehicle carve-out. A first-half 2024 initial public offering is anticipated. Ampere officially began operations on Nov. 1 with one model and management 2023 forecast volume of 45,000 units, revenue of EUR 2.8 billion, and an operating loss. Alliance partners Nissan and Mitsubishi invested a total of EUR 800 million in Ampere and Qualcomm is currently considering a stake. Renault Group will retain a “strong majority” of Ampere capital. Due to the time value of money, we raised our fair value estimate EUR 1 to EUR 90. The 5-star-rated shares of Renault currently trade at a compelling 60% discount to our new fair value.

Renault owns 43.4% of Nissan, while Nissan owns roughly 15% of Renault and 34% of Mitsubishi. Under a new alliance agreement, Renault will transfer 28.4% of Nissan shares into a French trust. The trust will sell shares under Renault direction but there is no time limit applied. Nissan shares will get voting rights. Renault and Nissan shares would be capped at 15% of the applicable voting rights. In 2022, Renault disposed of its 67.7% stake in the parent of Russian automaker AvtoVAZ and its other Russian assets, but a Russian financial services company remained on the balance sheet in assets held for sale at the end of 2022. In addition, Renault owns 99.4% of Romanian automaker Dacia, and 80.0% of South Korean Samsung Motors.

No-moat-rated Renault reported third-quarter group revenue of EUR 10.5 billion, up 8% from the prior year on an as-reported basis, but, excluding unfavorable currency translation, revenue jumped 14%. The top-line result beat the FactSet consensus revenue estimate by 2%. Automotive revenue was 5% higher, but excluding currency, improved 11% year over year. The “Renaulution” turnaround plan to improve pricing and mix supported roughly 7 percentage points of the automotive revenue increase. Volume improved 6% on a 22% increase in France and 12% in the rest of Europe. Geographic mix and sales to partners contributed 3 percentage points to revenue growth while sales to partners also added 3 percentage points. The French automaker discloses only revenue in the first and third quarters while full financial statements are reported for the half and full year.

Renault owns 43.4% of Nissan, while Nissan owns roughly 15% of Renault and 34% of Mitsubishi. Under a new alliance agreement, Renault will transfer 28.4% of Nissan shares into a French trust. The trust will sell shares under Renault direction but there is no time limit applied. Nissan shares will get voting rights. Renault and Nissan shares would be capped at 15% of the applicable voting rights. In 2022, Renault disposed of its 67.7% stake in the parent of Russian automaker AvtoVAZ and its other Russian assets, but a Russian financial services company remained on the balance sheet in assets held for sale at the end of 2022. In addition, Renault owns 99.4% of Romanian automaker Dacia, and 80.0% of South Korean Samsung Motors.

No-moat Renault reported first-half earnings per share of EUR 7.59, up EUR 5.28 compared with the prior year and slightly better than we had expected. Group revenue of EUR 26.8 billion was up 27% from the prior year, but, excluding unfavorable currency, revenue jumped 30%. Automotive revenue was also 30% higher excluding currency. The “Renaulution” turnaround plan to improve pricing and mix supported 12 percentage points of the automotive revenue increase. Because the chip shortage was more acute in the year-ago period, volume added 15 percentage points. The French automaker discloses only revenue in the first and third quarters while full financial statements are reported for the half and full year.

Renault owns 43.4% of Nissan, while Nissan owns roughly 15% of Renault and 34% of Mitsubishi. Under a new alliance agreement, Renault will transfer 28.4% of Nissan shares into a French trust. The trust will sell shares under Renault direction but there is no time limit applied. Nissan shares will get voting rights. Renault and Nissan shares would be capped at 15% of the applicable voting rights. In 2022, Renault disposed of its 67.7% stake in the parent of Russian automaker AvtoVAZ and its other Russian assets, but a Russian financial services company remained on the balance sheet in assets held for sale at the end of 2022. In addition, Renault owns 99.4% of Romanian automaker Dacia, and 80.0% of South Korean Samsung Motors.

No-moat-rated Renault raised its 2023 guidance from at least 6% operating margin and at least EUR 2.0 billion in automotive operational free cash flow to 7%-8% margin and at least EUR 2.5 billion cash flow. Management said the improved outlook was attributable to the turnaround plan, focusing on value over volume. The firm said that pricing and product mix as well as variable cost increases have been more favorable than expected. New guidance assumes the same volume as the previous, with Europe up low-single digits while Eurasia and Latin America are flat, respectively.

Renault owns 43.4% of Nissan, while Nissan owns roughly 15% of Renault and 34% of Mitsubishi. Under a new alliance agreement, Renault will transfer 28.4% of Nissan shares into a French trust. The trust will sell shares under Renault direction but there is no time limit applied. Nissan shares will get voting rights. Renault and Nissan shares would be capped at 15% of the applicable voting rights. In 2022, Renault disposed of its 67.7% stake in the parent of Russian automaker AvtoVAZ and its other Russian assets, but a Russian financial services company remained on the balance sheet in assets held for sale at the end of 2022. In addition, Renault owns 99.4% of Romanian automaker Dacia, and 80.0% of South Korean Samsung Motors.

No-moat Renault held an investor day for its Alpine brand, during which management set an ambitious revenue growth target and substantial margin expansion. Alpine started life in the 1950s as the tuner brand of Renault, and became well known for rally racing in the early 1970s. Alpine as a brand was dropped by Renault in 1995 but the A110 model, which had a production run from 1968 to 1977, and the Alpine brand were relaunched in 2017. The Renault Formula One race team changed its name to Alpine in 2021 to promote its racing heritage.

No-moat-rated Renault reported first-quarter group revenue of EUR 11.5 billion, up 18% on an as-reported basis from the prior year, but, excluding unfavorable currency translation and discontinued AutoVAZ operations, revenue jumped 30%. The top-line result trounced the FactSet consensus revenue estimate by nearly 10%. Automotive revenue was 32% higher, also excluding currency and discontinued operations. The “Renaulution” turnaround to improve pricing and mix supported roughly 14 percentage points of the automotive revenue increase. Because the chip shortage was more acute in the year-ago period, volume contributed 19 percentage points. Geographic mix and sales to partners contributed 4 percentage points while others were negative 5 percentage points. The French automaker discloses only revenue in the first and third quarters while full financial statements are reported for the half and full year.

Renault owns 43.4% of Nissan, while Nissan owns roughly 15% of Renault and 34% of Mitsubishi. Under a new alliance agreement, Renault will transfer 28.4% of Nissan shares into a French trust. The trust will sell shares under Renault direction but there is no time limit applied. Nissan shares will get voting rights. Renault and Nissan shares would be capped at 15% of the applicable voting rights. In 2022, Renault disposed of its 67.7% stake in the parent of Russian automaker AvtoVAZ and its other Russian assets, but a Russian financial services company remained on the balance sheet in assets held for sale at the end of 2022. In addition, Renault owns 99.4% of Romanian automaker Dacia, and 80.0% of South Korean Samsung Motors.

Renault owns 43.4% of Nissan, while Nissan owns roughly 15% of Renault and 34% of Mitsubishi. Under a new alliance agreement, Renault will transfer 28.4% of Nissan shares into a French trust. The trust will sell shares under Renault direction but there is no time limit applied. Nissan shares will get voting rights. Renault and Nissan shares would be capped at 15% of the applicable voting rights. In 2022, Renault disposed of its 67.7% stake in the parent of Russian automaker AvtoVAZ and its other Russian assets, but a Russian financial services company remained on the balance sheet in assets held for sale at the end of 2022. In addition, Renault owns 99.4% of Romanian automaker Dacia, and 80.0% of South Korean Samsung Motors.