POAHF - Porsche SE Is A Holding To Own

2023-03-24 11:40:35 ET

Summary

• Porsche SE recently invested in ABB E-mobility Holding AG to further accelerate the EV revolution.
• The dividend was confirmed.
• Porsche SE's special dividend was used to finance P911 second tranche acquisition. This was already incorporated in our estimates so we confirm our buy rating target.

After having participated in the Porsche Automobil Holding SE Annual Analyst Conference (POAHF) (POAHY), it is time to review our investment opportunity. Our most devoted readers know that we have a good grip on Porsche SE , and recently, we also published an update on Volkswagen AG Group (VWAGY) titled " Current Value Is Underappreciated ".

Our Porsche SE's buy case is supported by a Sum-of-the-Part valuation based on the following:

1. The company owns 31.9% of Volkswagen AG with no voting rights shares (and it also holds the majority in the voting class shares). At the current market price, this means that in our SoTP value, we should imply at least a valuation of €22 billion; however, based on our Volkswagen AG's target price set at €202 per share, Porsche AG's equity investment should be valued at €36.7 billion;
2. With the latest Dr. Ing. h.c. F. Porsche AG acquisition, Porsche SE also owns 12.5% of the newly listed entity . Here at the Lab, we are not covering P911; however, at the current market price, this means that in our SoTP value, we should imply at least a valuation of €6.5 billion.
3. Here at the Lab, we also assign zero value to Porsche SE's current venture portfolio.
4. Despite that, if we sum up points 1) and 2), and not considering Mare Evidence Lab's future expectations on Volkswagen AG's upside, we derived an enterprise value of €28.5 billion. Looking at the equity value and considering Porsche SE's financial obligation at €6.7 billion, we arrived at a valuation of €21.8 billion versus a current market cap of €15.5 billion. This implies a 40% discount which we believe is hard to justify.

Source: Porsche SE Global Auto Conference 2023

As a reminder, we suggest to our new readers check our previous publication. Why? " With the latest Dr. Ing. h.c. F. Porsche AG IPO and different classes of shares and different price movements, there is a lot of confusion". In addition, we also reported some negative comments to the investor community.

Going back to our thesis:

1. Given the recent P911 listing, Porsche SE was entitled to a special dividend distribution and received €3.1 billion. These funds were used for the P911 second tranche investments for a value of €3.0 billion. Indeed, Porsche SE was able to fully pay the P911 investment without further compromising its balance sheet. As a reminder, the company raised €7.1 billion on 4th October 2022 (Fig 1);
2. Despite the higher financial liabilities, Porsche SE continues to pursue stable and reliable shareholder remuneration. Management is committed to repay loans as well as to propose an unchanged dividend from last year. In detail, the company confirmed the DPS of €2.56 and €2.554 to preference shares and ordinary shares holders respectively. For the current year, this is equivalent to approximately €783 million (Fig 2). Based on a Seeking Alpha quant score, the company " has displayed warning signs that have historically led to dividend cuts ". Here at the Lab, given the recent results, we believe this is not the case (Fig 3);
3. Even if we are not providing value to Porsche SE's venture portfolio the company has recently invested in ABB E-mobility Holding AG thanks to a private placement. ABB is a leader in the e-mobility space and has sold more than 1m EV chargers across more than 85 markets. These new proceeds will be used to accelerate ABB's organic growth and also for M&A.
4. On the company's results, looking at the recent press release, in 2022, Porsche Automobil Holding SE delivered a group result of €4.8 billion compared to the €4.6 billion achieved last year. These positive results confirmed our investment thesis, and so we reiterate our buy rating target at €72 per share ($7.8 in ADR).
5. Additional risks to include in our target price are legal issues on share price manipulation in Volkswagen's ordinary shares in 2008 and the Volkswagen diesel scandal that could result in further cash outflows. Moreover, there is a risk of an auto downturn in particular in the European region.

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