The financial markets are always rational, as they claim ? Difficult to see, in the case of Faurecia… The first automotive oem French remains under-valued, and this, in spite of its good financial performance.
It is enough to see its stock market valuation. The group, who all weighs the same 18 billion euros of turnover, is only worth 6 billion euros on the stock Exchange. As A comparison, Valeo, and the other of the largest automotive French, shows a valuation of 14 billion euros for a turnover of 16 billion only. Leaning in more closely on the ratio, the more relevant the material, the PER (market value divided by its earnings per share), Faurecia is 9.8 compared to 12.2 for Valeo.
2016: the excellent raw Faurecia
Of course, Faurecia has just emerged from convalescence after several years of crisis and restructuring, while Valeo is back on track for more than four years already. In five years, the title has soared 430 per cent, against a rise of “only” 230% for Faurecia.
But the group, headed for a year now by Patrick Koller now seems poised to catch up with his compatriot. The year 2016 has been particularly brilliant for Faurecia. The operating margin has rebounded by 2 percentage points to 6.2 per cent. The Valeo is still far ahead at 8.1%, but whatever the dynamic is there. “You are the new Valeo “, would have told a portfolio manager at a Patrick Koller all smiles, on the occasion of the disclosure of the strategic plan of the branch Clean Mobility (environmental technologies).
Many analysts believe that Valeo may have reached a higher, without, however, excluding as it continues to move forward in light of the results of the company that surprise up to its CEO himself, Jacques Aschenbroich. However, Faurecia could be a nice alternative in the area.
“Faurecia is one of the values with the greatest potential to increase because it is still today a discount of 35% compared to its competitors, against a discount of a historic 10% “, said Marco Bruzzo, deputy managing Director of Mirabaud Asset Management.
| Also read : “Faurecia has to rebuild a relationship of trust with the markets,” Patrick Koller
Olivier Baduel, head of the Equity management Large Cap chez OFI AM, says that the movement has already started, as the title Faurecia has already increased by 20% since the beginning of the year, ” thereby incorporating the improvements made in recent years. On the one hand, the operating margin is significantly straightened and is similar to that of its competitors. On the other hand, the financial structure has been considerably strengthened “. The analyst, however, is more cautious in estimating the discount to 20%.
And he adds : “The society today is almost totally désendettée following the sale last year of its division of “outside” (the bumper) on the Plastic Omnium group. “
This sale might have so constituted the starting point of the recovery of the title, as it has increased by 60% in a year, after having stood still for the two previous years.
“This performance clearly place them the company in the top group of its sector with a performance nearly 3 times greater than the market since the beginning of the year and more than double over 1 year “, explains Olivier Baduel of OFI AM.
Marco Bruzzo shared this analysis, adding that the economic regulatory could play in the favor of the group : “The company should greatly benefit from the evolution of the regulation through the reduction of CO2 emissions and pollutants, and the reduction of the fuel consumption. “
And to continue: “Faurecia also has excellent visibility, with 53 billion euros of new orders and an improvement in margins, thanks to a geographic mix, China will double in size to 5 billion euros with an operating margin of 12%, and a product mix with the division’s Clean Mobility where the company is leading the way with margins close to 10%. The operating margin could drop to 5.2 percent in 2016 to more than 7% as from 2018. “
Innovation, lever for profitable growth
Moreover, this was the whole purpose of the day investor organized by Patrick Koller last Tuesday in London : roll out the plan of strategic development and innovation around clean technology grouped in the branch for Clean Mobility. Faurecia is committed to enhance its efforts to maintain its title of world leader in the remediation systems (SCR, EGR, etc.). The group also wants to position itself in the electric car market in full boom and on hydrogen cars – it will propose as early as 2019 a car of this type.
Faurecia is also developing its business model by attempting to increase the recurring income. With the acquisition of the Danish Amminex, the French wants to be able to equip fleets of buses, trucks from the ASDS, a system that is more efficient than the SCR and Ad-blue (ammonia that flows in the exhaust to neutralize Nox) with a system that is to install ink cartridges should not necessarily change. Faurecia promises that the cost of purchase and use will be lower than that of the Ad-Blue. It has just won several contracts to the international for equip of major cities (Seoul, London, Copenhagen). In clear, Faurecia wants to make innovation the main lever of profitable growth, the model successfully implemented by Jacques Aschenbroich by Valeo. Patrick Koller has promised to submit strategic plans for its other activities, including its “inside” with the cockpit of the future.
A title is still fragile and under pressure
But Faurecia could encounter many pitfalls on the path to a stock market rally. First, the economic situation does not play 100% in his favor. This week, the announcement of a warning about the results of a automotive oem German and the signal repeated to a slowdown in the United States have plunged the sector. Faurecia more than the other, even as its exhibition in the United States is quite reduced. The title Faurecia decreased by 7% on a week, where there is a decrease of only 5.5% for Valeo and 4% for Plastic Omnium. It is still the sign of some fragility in the title.
Confessed to Patrick Koller, Faurecia needs to rebuild confidence with the financial markets. “This weakness is of our responsibility. The entire strategy of Faurecia is now focusing on building trust. We will communicate more about what we do, and we demonstrate that we deliver on our promises. But this approach must enroll in the long term “, he declared in an interview with The Tribune.
The increase in raw material prices could also weigh on the results of Faurecia, without talking about the effects of foreign exchange, which have reached significant levels of volatility, particularly in Europe with the Book. The momentum of the back end could also be in sync with the bullish cycle of the sector, which would be about to come to an end.
PSA wants to sell its 47% stake
Finally, the intentions of the PSA are not neutral. The group is a French car, a shareholder history of Faurecia, in which it is passed under the bar of 50% by the end of 2015, could continue to descend in the capital. Patrick Koller wants to be reassuring : “We will act in a coordinated way. “It is for the boss of Faurecia not to let PSA dumping its 47% share on the market, which could pull the title down.
Analysts, themselves, are not worried. “The risk that all or part of the capital owned by the PSA group to be sold shall not, in itself, constitute a barrier to investment,” insists Olivier Baduel. Marco Bruzzo, Mirabaud AM, him, judge, that the hypothesis of a withdrawal of the PSA ” is not a reason to uncertainties weighing on the title “.
Patrick Koller believes that Carlos Tavares, CEO of PSA, believes in the potential of Faurecia and that it shall not assign its securities only when they have climbed. He hopes may be able to avoid having to use an expensive program to buy back shares to support the price…
