(AOF) – Midcap Partners’ recommendation for Plastic Omnium is Hold with a target price of 20 euros. The analysis office highlights the group’s great ambitions in hydrogen. Plastic Omnium organized a visit to the main site of its EKPO joint venture with ElringKlinger dedicated to the production of fuel cells for mobility. The group took the opportunity to deliver a detailed presentation of its hydrogen strategy and its new New Energies division, explains the broker.
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Key points
– 27
th
“Tier 1” automotive supplier born in 1946, world number 1 in bodywork parts, fuel systems and modularization;
– Sales of €8 billion split between lPO industries for 73% and PO Modules;
– Turnover mainly in Europe (53%), North America (26%), Asia (23% including 16% for China);
– “PO Way” business model: independence, self-financing capacity, investments to capture market growth, innovation, integration of employees;
– Capital 59.4% controlled by the founding Burelle family and hosting the French state (1.54%);
– Healthy and strengthened balance sheet with a debt to equity ratio of 41%, a leverage effect of €1.1 and €2.7 billion in cash.
Challenges
– “Shaping the future of mobility” strategy: focus on hydrogen with a 2030 target of €3 billion and world number 1 in the manufacture of fuel cells, tanks and integrated systems / deployment of industry 4.0 , process transformation and cost reduction of €200 million by the end of 2022 via the “Omega” plan;
– Innovation strategy based on 2 R&D centers: launch of a new branch, specialized in hydrogen mobility / advances in electrification, via partnerships (Airbus, Alstom, AVL, McPhy, Yundai…) / ecosystem innovation and investments via the APVentures and Aster funds;
– “Act for climate” environmental strategy aiming for carbon neutrality by 2025: eco-design and recycling of waste / efficiency programs to reduce energy consumption / preservation of biodiversity / design of light and more aerodynamic parts (5 to 17% of ZEV in 2025 revenues);
– Hydrogen mobility strategy: realization of the 100 projects in progress, via EKPO Fuel Celle technologies, 40% owned alongside the German company Elringklinger, and other partnerships…
– Continued opening of industrial sites: 4 in 2021, 2 in 2022 and 2 in 2023-24.
Challenges
– Dependence on sales to Volkswagen (26% of turnover), Stellantis (17%) and Daimler (11%);
– Increased flexibility in the face of the shortage of semiconductors;
– Continued market gains in motor vehicles (8% of sales in 2021);
– 2022 objectives: outperformance of sales compared to the market, improvement in the operating margin between 5 and 6% and minimum free cash flow of €250 million;
– 2021 dividend of €0.28, i.e. a rate of 38%.
Negotiations with builders
On average, equipment manufacturers represent between 60 and 85% of the manufacturing cost of a vehicle. According to the Federation of Vehicle Equipment Industries (Fiev), negotiations are very tense with manufacturers regarding the passing on of increased costs. The price increases concern both electronic components, raw materials, such as steel, nickel, lithium or palladium, energy and transport. Equipment manufacturers mainly negotiate with Stellantis and Renault to set up indices to pass on increases. They are also betting on innovation, differentiation, upgrading and internationalization.