Home Equity Research Equity Report 08.09.2021

Equity Report 08.09.2021

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DAIMLER AG (DAI) 

Daimler AG develops and manufactures passenger cars, trucks, vans and buses worldwide. DAI operates under 3 main activities:
– Mercedes-Benz: Cars and vans
– Daimler: Trucks and buses
– Daimler Mobility: financial services provider
DAI sales were up by 3% y/y in FY19 to €172.7 Bn, carried by strong growth in the United States (+10% y/y) and Germany (+6% y/y). Overall, the company sold over 3.3 M automobile units worldwide, maintaining a growth at a medium pace (4% growth on
average since 2017) up 3% y/y, In terms of margins, EBIT reached €4.3 Bn (3% margin), down 60% vs prior year related several measures including legal proceedings (fined €870M by Stuttgart public prosecutor), restructuring measures and M&A transactions. In addition, net profit declined to €2.3 Bn (1% margin) which led to a decline in EPS to €2.22.

With strong revenues in FY19 this year, the German carmaker DAI, with its latest earnings (Q3-20), showed its main buiness recovered from the covid-19 crisis and lockdown period that shut down production facilities, showrooms and kept customers at home for weeks (during Q1-20 and Q2-20). DAI recaptured growth in this quarter with over 770,000 vehicles sold, up 43% vs prior quarter. In addition, revenues climbed to €40,2 Bn, up 33% q/q (down 7% vs prior year). Consequently, over this quarter, DAI manage to extract positive returns from its core business as both EBIT and net margin reached 7% and 5% (better margins than prior year Q3-19).

To exploit this positive momentum, the German automaker, Daimler, intends to focus on its top selling premium car brand Mercedes-Benz, building up AMG, Mayback and G-Wagon brands, with the project to shift to electric cars in the next years.
Also, to fund this costly transition, the firm plans to make several adjustments by cutting its fixed costs, reducing spending in personnel costs, capital expenditure and R&D by more than 20% by 2025.
By Q3-20, DAI reached €5.1 Bn in terms of free-cash-flow for its industrial business (vs €2.8 Bn prior year), and will continue to increase over the next periods. Expectation for Q4-20: Number of units sold will be levels below before the pandemic (range of 800K-850K unit sold), still in the recovery stage. and total sales within a range of $40-$42 Bn.

 

Written on 05/11/2020

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