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Analyse aandeel Fiat Chrysler Automobiles - Aanbevolen Aandeel

Fiat kan nog aanzienlijke schaalvoordelen halen uit zijn overname van Chrysler. De markt schat de combinatie Fiat-Chrysler niet op waarde. (Engelstalig rapport)

Richard Hilgert 05 december, 2014 | 16:12

INVESTMENT THESIS

In our view, the market has unfairly discounted the intrinsic value of Fiat Chrysler Automobiles. We believe there are substantial benefits to be derived from the Fiat and Chrysler combination. Greater scale can be achieved in components, platforms, and capacity. An array of brands reduces reliance on any one vehicle category. Greater scale across more geographic regions lowers the company's costs and reduces Fiat's dependence on domestic (Italian) volume. Nonetheless, we think that only those willing to accept the risks of a highly leveraged turnaround situation in a competitive, capital-intensive, highly cyclical industry should consider investing.

The combined entity has eight brands that cater to nearly all customers (passenger and light commercial). The downside to more brands is higher marketing and distribution costs. Poor product execution results in look-alike vehicles with only a grille badge to differentiate the brands. On the upside, a diversified portfolio of well-differentiated brands reduces exposure to any single vehicle segment and substantially increases economies of scale. The scale of the combined entity is around 6 million vehicles, the sixth-largest car company in the world.

As a market leader in Brazil (low 20s share), Fiat will benefit from that country's rising middle class. However, the company was late to Russia, India, and China and will undoubtedly lag already-established competitors' market shares. Even so, we expect Fiat to participate in the above-industry-average growth in emerging-market demand. Jeep's re-entry into China will provide Fiat with a turbo boost to its share of the market.

While management views the group's parts-making operations as strategic to its auto-assembly operations, we believe that parts and systems manufacturing should be completely separate. Even though the economic environment ultimately drives demand for both the automotive original-equipment manufacturers and the parts suppliers, the dynamics of the businesses are quite divergent. However, to management's credit, profitability and returns on Fiat's parts businesses are competitive with those of other major European auto suppliers.


VALUATION

Economic Moat   Fair value   Stewardship Rating   Fiat 500
None   EUR 12,00   Standard  
Moat Trend   Uncertainty   Sector  
Negative   High  

Cycl. consump. goed - auto's

 

BULLS

  • Fiat's alliance with Chrysler provides scale and purchasing power that it would otherwise struggle to achieve on its own.

  • Leading share position in Brazil and presence in other developing markets enhances potential top-line growth prospects beyond that of Fiat's domestic market.

  • On a relative basis, Fiat ex-Chrysler has one of the largest cash positions of any auto manufacturer, alleviating high leverage concerns.

 



BEARS

  • The global auto industry suffers from overcapacity that increases pricing pressure, in turn limiting economic profits.

  • Fiat and Chrysler's work forces are highly unionized, a threat to profits if workers demand wage increases or refuse labor cuts.

  • Fiat has a high level of financial leverage that, in the event of substantial volume downturn, would divert significant cash from reinvestment in the business to debt service.

 

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Effecten genoemd in dit artikel

Naam effectPrijsChange (%)Morningstar Rating
Fiat Chrysler Automobiles NV14,42 EUR-1,78
General Motors Co38,59 USD-0,34

Over de auteur

Richard Hilgert  Richard Hilgert is a securities analyst on the Industrials Team.

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