Renault, “history of recovery in the face of macroeconomic deterioration”, Company News

Renault still gained more than 4% in the stock market on Monday, making the automaker the best result of the day on the Cac 40, and investors remain under the influence of higher financial targets for this year. The announcement, made on Friday morning, when the reports for the first half of the year were published, thus restores the assessment of the French group from that which it had before the start of the war in Ukraine; just over 30 euros per Renault share (capitalization of almost 9 billion euros, one of the lowest in the Cac 40) is at its highest level since February 24 in the stock market.

Although the former owner of the AvtoVAZ brand was forced to leave Russia, he said late last week that he was increasing his annual operating profit and free cash flow ambitions. His marketing strategy, which is part of Renault’s plan, is bearing fruit and has eclipsed the effects of leaving the second market.

The automaker was one of the most respected tricolor groups in Russia. The end of the story affected the 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, then the results are more flattering.

Stellantis “more solid”

Renault managed to generate almost 1 billion 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%. This, of course, is still very far from current industry standards (10.4% for Stellantis in Europe – a market that represents 70% of Renault – while maintaining a comparable base), but progress is clear.

Throughout fiscal year 2022, the diamond group, which has been engaged in a delicate restructuring and strategic repositioning since Luca de Meo took over, announced that it is aiming for an operating margin of over 5% (up from about 3% so far) and free cash flow automotive operating income (i.e. excluding finance and leasing industries) of more than 1.5 billion euros, where before that he simply said to expect a result “positive”.

“Renault’s very good half-year publication and the strong year-on-year increase reflect both the significant progress made by the manufacturer since the arrival of Luca de Meo, pulse a very favorable start to the year for manufacturers (shortage that increases range and prices and more than offsets falling volumes and inflation), but also management’s confidence in its forecasts for the second half of the yearexplains financial analyst Michael Fundoukidis of private bank Oddo BHF, who, however, has a “neutral” opinion on the value (target price, however, increased from 30 to 35 euros), due to“From a position that is still unstable in relative terms. »

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

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


This is the complexity of the Renault recovery story. Mr. Fundoukidis points out that recovery is “becomes more convincing with management largely delivering on its promises (admittedly backed by pulse automotive ‘exceptional’), whether it is a reorganization of commercial policy, production plan or cost reduction. On the other hand, the deteriorating economic environment, especially in Europe where the group is overvalued (in absolute and relative terms), prompting us to favor players that are operationally and financially sounder and more diversified, such as Stellantis, whose valuation ( surprisingly) is relatively close. »