Renault still gained more than 4% on the stock market on Monday, making the automaker the best performance of the day on the Cac 40, investors remaining under the spell of raising financial targets for this year. The announcement, made on Friday morning when the accounts for the first half of the year were published, thus allows the valuation of the French group to reconnect with that which it had before the start of the war in Ukraine; at just over 30 euros per share, Renault (nearly 9 billion euros in capitalization, one of the lowest in the Cac 40) is at its highest since February 24 on the stock market.
Although the former owner of the AvtoVaz brand was forced out of Russia, it said late last week that it was raising its annual operating margin and free cash flow ambitions. Its upmarket strategy, as part of its “Renaulution” plan, is bearing fruit and has eclipsed the impact of leaving its second market.
The automaker was one of the most established tricolor groups in Russia. The end of the story has an impact of 2.3 billion euros on the net result, a loss of 1.67 billion. But, if we reason on a Renault outside Russia, which is now the face of the group, the results are more flattering.
Stellantis is “more solid”
Renault succeeded in generating nearly 1 billion in free cash flow over the first six months of the year and the recovery in profitability was confirmed through an operating margin of 4.7%. It is, of course, still very far from the current standards of the sector (10.4% for Stellantis in Europe – a market which represents 70% of Renault – to retain a comparable basis), but the progress is clear.
For the whole of the 2022 financial year, the diamond group, engaged in a delicate exercise of restructuring and strategic repositioning since the arrival of Luca de Meo at its head, has announced that it is aiming for an operating margin of more than 5% (compared to around 3% so far) and a free cash flow automobile operating income (i.e. excluding the financing and leasing branches) greater than 1.5 billion euros, where, until then, he simply said to expect a result ” positive “.
“Renault’s very good half-yearly publication and the significant increase in annual targets reflect both the significant progress made by the manufacturer since the arrival of Luca de Meo, the momentum very favorable start to the year for manufacturers (shortages which push up the mix and prices and more than offset the drop in volumes and inflation) but also management’s confidence in its outlook for the second part of the yearexplains the financial analyst Michael Foundoukidis, within the private bank Oddo BHF, which however maintains an opinion of “neutral” on the value (with a price target nevertheless raised from 30 to 35 euros), because of“from a positioning that is still fragile in relative terms. »
Therein lies the difficulty of the story of Renault’s recovery. Mr. Foundoukidis points out that the recovery is “increasingly convincing with a management that largely delivers on its promises (admittedly supported by the momentum automotive ‘exceptional’), whether it concerns the reorganization of the commercial policy, the product plan or the reduction of costs. On the other, a deteriorating economic environment, particularly in Europe where the group is overexposed (in absolute and relative terms), and which pushes us to favor players that are more solid operationally and financially and more diversified like Stellantis, whose valuation is (surprisingly) relatively close. »