© Reuters.
Investing.com – The automotive sector continues to change and the electric trend is gaining momentum. Until then, Tesla (NASDAQ:
However, DBS Bank sees a strong future for Volkswagen Group ( ETR: ) ( VW ), which has a diverse automotive empire that includes mass-market brands such as Volkswagen, sporty Porsche ( ETR: ) and luxury luxury Lamborghini. This diversity has propelled VW to the top of the global automotive market with a 10% market share based on revenue in 2022.
But the jewel in VW’s crown lies not only in quantity, but also in quality. Its premium brands such as Lamborghini posted impressive margins in the first half of 2023, with Lamborghini’s EBIT margin exceeding 32% and even beating Ferrari’s (NYSE: ) 26%, according to bank data, according to DBS data.
With the ramp-up of electric vehicle (EV) production, VW is poised to become a major player in the segment. The company predicts that electric cars will account for 8-10% of its sales in 2023, with planned deliveries of 900,000 units. VW is thus ahead of other American and European automakers in EV deliveries.
However, a recent downward revision by management casts a slight shadow over this picture. While VW reiterated its FY23 revenue and unit sales forecasts (10-15% revenue growth and 9-9.5 million vehicles), it revised its EBIT margin outlook to 7.0%, reflecting the impact of a weaker third quarter and signs of an economic slowdown.
However, DBS believes the risks are minimal. “We believe the downside risks are largely priced in as VW is currently trading at attractive levels with a forward PE ratio of around 4.0x.”
According to the bank, several positive catalysts could push VW’s share price higher, including ongoing product launches, a 10 billion euro savings initiative and an expansion of the battery factory.
While demand risks in key markets and potential headwinds to the transition to electric vehicles remain, VW’s diversified portfolio, valuation and catalysts remain attractive. DBS has a revised price target of €135 (compared to €141 previously), an increase of 17%.
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