(BFM Bourse) – The diamond brand has clearly outperformed the CAC 40 since the start of the year. As its Capital Market Day looms on Tuesday, the manufacturer still has various means to electrify its action.
Faced with numerous storms, Renault resists. Since the beginning of the year, the car manufacturer has suffered much less than the CAC 40, posting a decline in its price of 0.8% when the flagship index of the Parisian market fell 12.7% over the same period. This despite the exit from Russia, which deprived him of around 10% of his income.
At a time when the group is preparing to hold its Capital Market Day, that is to say a day dedicated to investors, on Tuesday, the diamond brand still has horsepower in its engine to boost its share price. Overview.
> Successful launches of new models
Managing Director Luca de Meo’s policy of prioritizing value over volume has paid off. Evidenced by the group’s latest publication, its quarterly turnover, with an increase in revenues (excluding Russia) over one year of nearly 22% in the third quarter with a contribution of price increases to a historic high of almost 13%. The group has redirected its volumes towards more profitable channels, namely sales to individuals, unlike sales to rental companies.
The objectives defined in the “Renaulution” plan at the start of 2021 are on the way to being achieved three years in advance. Renault expected to generate an operating margin of at least 5% in 2025. If the diamond group respects the outlook communicated to the market at the end of July, it will achieve this this year.
Renault must, however, stay on course as Deutsche Bank expects the buoyant wind of price increases to run out of steam next year. This will go through new financial objectives which should be communicated on Tuesday. “We would prefer Renault to indicate an ‘all weather’ profitability target [c’est-à-dire à l’épreuve de tous les évènements adverses]“, warns UBS.
The group can count on its hitherto successful launches. The Arkana SUV, marketed last year in Europe, and the Dacia Jogger have so far recorded 60,000 and 65,000 orders since the beginning of the year. The Megane E-Tech Electric, a highly strategic vehicle for the group, has garnered 37,000 since its debut in the second quarter. Over the 2023-2025 period, 21 new group vehicles will arrive on the market. For Credit Suisse, continued success with new model launches is a catalyst for action.
> Set up “Ampere” and “Horse”
From the beginning of 2022, Renaut had indicated that it was studying this project which consists of creating two companies. The first (with the code name “Ampère”) would group together its activities of marketing and production of electric vehicles and the second (“Horse”) would be dedicated to the development and production of thermal and hybrid engines and gearboxes. The group is due to present the findings of this project on Tuesday.
This measure would not amount to a split because these two entities would each only bring together around 10,000 employees, knowing that Renault employed more than 110,000 people in 2021 outside of Russia. “Ampère” could be floated on the stock market in the second half of 2023, with Renault nevertheless wishing to retain majority control. “Horse” could for its part be based abroad and Renault plans not to retain the majority of the capital, thus opening up this entity to partners. At the end of August, press reports had notably mentioned discussions with the Chinese car manufacturer Geely and the Saudi oil group Aramco.
This potential new organization seems to please the market. The progress reported by various media has thus contributed to boosting Renault’s share price. In a note dated mid-October, Stifel estimated that this separation should allow each entity to obtain higher valuation multiples, improve the allocation of capital as well as, ultimately, the return to the shareholder. . In particular, a partial IPO of the “Ampère” perimeter should “crystallize value and finance future developments” of this company, wrote the design office. Stifel estimated that “Ampère” could generate more than 40 billion euros in revenue in 2030, almost as much as Renault in 2021. The financial intermediary valued the division at 23.5 euros per Renault share (7 billion euros in total) against 1.5 euros for “Horse” and 31 euros for the rest of the group’s activities, such as sales financing or central functions.
> Rebalance the structure of the alliance with Nissan
This file should not be directly mentioned by the management of Renault on Tuesday, the event being devoted to the progress of the “Renaulution” plan. But the general manager, Luca de Meo, and the financial director, Thierry Piéton, will probably not escape questions on this subject.
According to several media including BFM Business, Renault and Nissan are discussing both a potential entry by Nissan into the capital of “Ampère” and a rebalancing of cross-shareholdings between the two groups. The two manufacturers confirmed in October the first part in a press release without expressing themselves explicitly on the second. “Further communications will be made, in due course, by the members of the Alliance”, they had indicated.
At present, Renault holds 43.4% of the capital of Nissan, which in turn owns 15% of Renault but without voting rights. This asymmetry has sometimes been a source of tension on the side of Yokohama. Renault could ultimately agree to lower its stake in the long term, the Japanese group wanting the diamond manufacturer to drop to 15%, according to several media.
Financial analysts have long argued for such a rebalancing. “Too much capital is invested in the partnership with Nissan (around 7 billion euros)” whereas “it is no longer necessary because the cooperation is finally working”, judges Stifel. The financial intermediary explains in particular that if Renault agreed to go below 40% of Nissan, the Japanese group would recover its voting rights, under the French Commercial Code. “The largest company in the Alliance would therefore no longer consider itself as the junior partner”, writes the study office.
According to the latter, Renault could free up around 2.8 billion euros by lowering its stake to 25%, which could for example be used for shareholder return measures. Last month, Royal Bank of Canada calculated, for its part, that going from 43.4% to 15% could allow Renault to “monetize” around 4 billion euros. The Canadian bank warned, however, that this amount could very well be reinvested in the group’s electrical activities rather than being returned to shareholders in the form of a special dividend.
Julien Marion – ©2022 BFM Bourse
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