MAINFIRST on VW (+/220) With Dieslgate becoming a distant memory we push the BUY case again this morning. Audi model upswing starts (A8, A7 and new A6 in H2-18) and a host of new SUVs will push Audi’s EBIT up 25% by 2020 (vs 2017) and VW’s new high margin Atlas now represents half of its US sales. Reports out that the first pure electric SUV (on MEB platform) will be out by 2019 should also allay R&D fears. Underlying FCF is underestimated by the street and we expect consensus upgrades to ensue. VW remains out TOP AUTO PICK
Monaco Alpha View: On a conservative SOTP the stock is worth north of 220 … and if they were to truly breakup the between the truck, luxury and mass market, stock would go north of 250 … It is still the cheapest auto in the sector for us with earnings power and levers to pull BUY +20.07% so far
VW SAID TO CONSIDER OPTIONS FOR DUCATI MOTORCYLE BRAND
Thursday • 27th April 2017 • 08:00
Rtrs Sources: VW said to consider options for Ducati motorcycle brand; Evercore appointed to explore options, Could Fetch EU1.5b
OUR VIEW: Good news as we know they are conducting a portfolio review. There is upside from restructuring if they sell brands like Ducati or spin off the trucks business.
From a fundamental perspective they pre-announced (April 18th)positive 1Q group headline Ebit of about 4.4 billion euros, up 28%, and disclosed that the VW brand generated Ebit of about 900 million euros vs. 73 million euros in 1Q16. Thats a very good beat with a 3.5% auto margin.
Going forward we see positive volume growth truck profitability and cash generation.
Add to this it is one of the cheapest in the space and has good earnings momentum.
Happy to stay long for 2018. We see 50% upside from here. Currently +4.07%
UPDATE: BUY VW : POST CMD
MONACO ALPHA: UPDATE: BUY VW : POST CMD
If you bought it for the CMD then I would close and take the hit. Apologies. Nothing really that new came out of the day. VW are doing what they did last year by keeping expectations grounded so they can beat throughout the year.
However I am running the trade as this year they will have a decent year and there are many reasons why this stock is a long.
DoJ settlement means the last major liability is settled. Now all about the operational side where momentum turned in Q4. Trough margins (2%) vs the sector margins peaking. So much fat to be cut. .
Efficiency programme could mean 4% margins by 2018 and a massive EBITDA uplift. Add to this it is one of the cheapest in the space.
Happy to stay long for 2018.
CMD TOMORROW. THE MARKET EXPECTS VERY LITTLE
FY numbers and CMD tomorrow. The market expects very little. The nasties have been pre announced in the headline P&L and cash flow numbers. Tomorrow we get to see divisional performance, where we should see a solid result from brand and China that could help settle nerves.
CMD expectations are very low, partly because it’s only a 3 hour event. But we should get confirmation that guidance has been set to be beaten through the year (as it was last year), and a progress report on the portfolio review announced last summer. Granular detail on either will be taken positively.
Still cheap, margin improvement story. Momentum turned in Q4. Trough margins (2%) vs the sector margins peaking.
Management know they need to start expressing that more comprehensively to the street. Perhaps that starts tomorrow. BUY