Reiterate BUY Stellantis, +8% ABS

*Strong earnings with better than expected margins

*Also beats on FCF much stronger than expected after the drop in 1H – this is a large beat to analysts’ estimates

*Confirms EUR 1bn dividend subject to AGM approval on 15 April

*Expected to realize 80% if the EUR 5bn annual syergies by end of 2024

*EO FP distribution should also benefit holders as the EO shares has been under pressure due to the overhang – also interesting announcement from EO last month that they will push more aggressively into the market for hydrogen vehicles as part of a new growth plan 

*The company’s focus on the small vehicles segment also leaves it less exposed to structural disruption relative to its peers

*Their focus aim to develop and approve winning strategy for Chinese market could also be very interesting, they currently have a CMD set for late 2021 or early 2022

*While we traditionally do not like stocks that are consensus longs we beleive the upside potential for STLA IM is still there and the recent pullback has cleared the decks to an extent

*Our DCF valuation of STLA is EUR 18 short terms while EUR 20 on a long term basis leaving

BUY Stellantis – Fighting giant created, +40% upside – PT EUR 18,

Wednesday • 20 January 2021 • 16:09

*The merged Fiat Chrysler and Peugeot company started trading today under the new name – Stellantis

*With EUR 3.5bn in synergies the group will get to another level competition wise

*The new giant will produce massive FCF yield and with Tavares in charge with his track record we expect this to accelerate

*Index weighting increase for CAC, MIB and SBF on today will mean that more passive money goes into the name

*Distribution of stake in EO FP will also happen soon – we have seen a couple of upgrades on EO FP over the last couple of days arguing that the overhang in the stock will be less dramatic than what is being priced in – our DCF shows a 100% upside for EO FP with a price target of around EUR 80-90 versus the current EUR 41

*The estimate of the COMAU and EO FP distribution is around EUR 1 worth of STLA

*Estimates are around 0.0174 EO FP share for every Stellantis – including that with the COMAU stake its around EUR 1 in total

*Merger also helps the company transform into more EV business which is good from an ESG perspective

*Manlay who has previously been in charge of Ram’s spin-off and Jeep’s recent success is set to run Americas, NA and Latam which should help the group transform into a much stronger entity

*Our DCF valuation of STLA is EUR 18 short terms while EUR 20 on a long term basis

Stellantis tickers:  STLA IM, STLA FP, STLA US

ANR <GO> has 18 Buys, 2 Holds and 2 Sells on STLA FP

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