FAURY - Valeo Hammered On Sector-Wide Operational Challenges And Future EV Fears

• Valeo has been hit hard, as has the sector, as auto production volumes have been well below expectations while erratic production schedules and higher input costs hammer margins.
• Bearish analysts have fretted about lower EV earnings forecasts but seem to underplay the role the pandemic has played in delaying launch schedules.
• OEM insourcing of EV components, as well as competition, are both risks, but risks I've been incorporated into the outlook all along.
• Long-term normalized revenue growth of 3%-4%, FCF growth of 5%, and mid-teens EBITDA margins in FY'26 can support a substantially higher fair value, but the Street is very down on auto suppliers now.

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