Renault, “History of recovery in conditions of macroeconomic deterioration”, Company news

Renault was still up more than 4% on the stock market on Monday, making the carmaker the best performer of the day on the Cac 40, as investors remained swayed by spells of higher financial targets for the year. The announcement, made on Friday morning when the accounts for the first half of the year were published, thus allows the rating of the French group to recover the rating it had before the start of the war in Ukraine; at just over €30 per share Renault (almost €9 billion capitalization, one of the lowest in the Cac 40) is hitting its highest level since February 24 on the stock market.

Despite being forced out of Russia, the former owner of the AvtoVaz brand said late last week that it was raising its annual operating margin and free cash flow ambitions. Its high-end strategy, as part of the “Renaulution” plan, is bearing fruit and overshadowing the impact of the exit from the secondary market.

The automaker was one of the most famous tricolor groups in Russia. The end of the story affected a net result of 2.3 billion euros, a loss of 1.67 billion. But, if we talk about Renault outside of Russia, which is now the face of the group, the results are more pleasant.

Stellantis “solider”

Renault managed to generate almost 1 billion in free cash flow in the first six months of the year, and the recovery in profitability was confirmed by an operating margin of 4.7%. Of course, this is still a long way from current sector standards (10.4% for Stellantis in Europe – a market that represents 70% of Renault – to maintain a comparable base), but progress is clear.

Throughout the 2022 financial year, the diamond group, which has been involved in a delicate restructuring and strategic repositioning since Luca de Meo took the helm, announced that it is aiming for an operating margin of more than 5% (compared to around 3% currently) and a free cash flow automotive operating income (i.e. excluding financing and leasing divisions) exceeds 1.5 billion euros, where until then he simply said to wait for the result “positive”.

“Renault’s very good half-yearly publication and significant increase in annual plans reflect the significant progress made by the manufacturer since the arrival of Luca de Meo, pulse a very favorable start to the year for producers (shortages pushing up inventory and prices and more than offsetting falling volumes and inflation), but also management’s confidence in its outlook for the second half of the yearexplains financial analyst Michael Fundoukidis of private bank Oddo BHF, who, however, maintains a “neutral” view on value (the price target is nevertheless raised from €30 to €35), due to“from a position that is still fragile in relative terms. »

The Bloomberg consensus, based on the expectations of about twenty analysts, is targeting a twelve-month price target of nearly €40.  Twelve analysts recommend buying Renault on the stock exchange

The Bloomberg consensus, based on the expectations of about twenty analysts, is targeting a twelve-month price target of nearly €40.  Twelve analysts recommend buying Renault on the stock exchange
The Bloomberg consensus, based on the expectations of about twenty analysts, is targeting a twelve-month price target of nearly €40. Twelve analysts recommend buying Renault on the stock exchange | Photo: Bloomberg


This is the complexity of Renault’s recovery story. Mr. Fundakidis notes that restoration is “increasingly convincing with a leadership that mostly fulfills its promises (albeit supported pulse automobile “exceptional”), regardless of whether it is a reorganization of commercial policy, product plan or cost reduction. On the other hand, a the deterioration of the economic situation, especially in Europe, where the group is overexposed (in absolute and relative terms), and this leads us to prefer players that are more operationally and financially sound and more diversified, such as Stellantis, whose valuation (at miracle) is relatively close. »