RNSDF - Renault: Positive Numbers Ahead Of The Capital Market Day

Summary

• The Capital Market Day will be a key catalyst in Renault's future.
• Renault aims to catch up in electric vehicles in comparison with Tesla and Volkswagen.
• Renault is planning a network of electric vehicle charging stations along European motorways.
• Outlook was confirmed and so was our valuation.

Last time, we concluded that Renault's CEO was more open to reviewing the Alliance called the " Best of 3 Worlds for a New Future ", with a broader scope to safeguard the industrial collaboration. As mentioned in a previous article , Nissan would include the option of a Renault drop in the shareholding from an equity stake to 15% from 43%. In return, they are considering an investment in Renault's electric vehicle division. According to rumors and in order to support this transaction, the Japanese group is looking to raise funds to buy back Renault's equity stock.

Renault's EV future

According to De Meo, relations with Nissan have been in the middle of the road for too long, and now it is time for a change. On November 8, in fact, the details of the revisiting operation of the historic alliance will be revealed to the investor community on a specific Renault strategic day.

Nissan would invest in the newly formed Renault company dedicated to electric cars and would allow the Chinese company Geely to enter the company that produces thermal cars, hybrids, and plug-ins. In short, while Stellantis seems increasingly on the defensive against the Chinese advance, Renault opens its doors to China, the architects of Volvo's rebirth which was destroyed by Ford's inability to manage such a high-value brand.

On the other hand, Mitsubishi has not yet officially announced whether it will move into Renault's future EV division. However, according to Reuters, Mitsubishi is considering acquiring a " single-digit " equity stake in this division.

Q3 results

Aside from the latest Renault development ( OTCPK:RNSDF ), today the French car producer released its nine-month results. It was a very good quarter and pretty much in line with the half-year accounts.

1. Despite lower vehicle production, the automotive top-line sales were up by more than 20% reaching €9 billion. Even if we include the discontinued operations (related to Russia), the company recorded outstanding results (fig 1);
2. Turnover figures were totally supported by price increases with a positive price delta effect of 12.8 points in Q3, the best historic results achieved by Renault;
3. Related to point 2), the company confirmed the new model's success. Numbers in hand, Renault's order book remains at a historic high,
4. For the above reason, the Group confirms its 2022 guidance (fig 2). As a memo, Renault group EBIT margin is set at more than 5% (from 3%) and FCF generation higher than €1.5 billion (from "positive").

Fig 1

Source: Renault Q3 presentation (Fig 2)

Conclusion

The next key catalyst is Renault's Strategy Day planned for November 8. The company's guidance was confirmed, and so was our valuation (and Mare Evidence Lab's neutral rating).

Previous articles for the French automaker:

• The most exposed automotive company in Russia;
• A sad day for the French Group.

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