AutoWallis: Target price set at HUF 180
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After a hot fall, a spring tornado could wreak havoc in France
Barely half a year after this year’s French budget was passed, the wrangling over the 2027 budget is about to begin, but that’s not all, because France will also hold a presidential election next spring. During the first public presidential debate, some of the radical candidates put forward ideas that were, at times, unconventional. Although the presidential election in late April still seems far off, based on the latest polls, if no candidate secures enough votes and a runoff is held, it cannot be ruled out that two radical presidential candidates will face off against each other. Market participants may have begun to price in this growing uncertainty, as the yield spread between French and German 10-year government bonds has started to widen again in recent weeks. The period ahead promises to be full of twists and turns, so it will be worth keeping a close eye on developments in French domestic politics.
Commodities - Technical Analysis
Gold and silver prices have retested their uptrend lines, so the long-term trend may continue. Oil prices have broken out of a contracting pattern, which may signal the start of another upward wave. Natural gas prices have also begun to rise, signaling a buy. In the case of copper, the main uptrend remains in effect, and there are currently no signs indicating a change in the trend’s structure. Following significant gains, wheat and corn have become heavily overbought, increasing the likelihood of a correction.
After updating our model, we set a 12-month price target of 180 forints and a Buy recommendation on AutoWallis. The company has published a new 5-year plan this year and is continuing on its acquisition path, announcing another significant acquisition in the Czech Republic in November following its first Czech transaction in the spring. The recent deal is not yet included in our model due to limited public information available but we expect it to be accretive.
With new car sales declining in Europe and the major manufacturers struggling to maintain profitability in the face of increasing competition, the automotive market environment poses many challenges for the company. This is also a headwind for dealers. It is therefore important that AutoWallis completes two major acquisitions this year and continues to grow in size, which will help to improve efficiency. The strategic focus on expanding the higher-margin Mobility services business unit and the implementation of business developments (e.g. the opening of a Renault-Dacia showroom in Budapest this year) will allow the company to maintain a profit growth dynamic above the industry average.
The figures for 24Q3 were not very impressive: although sales were up (+9%), profits were significantly down YoY (EBITDA: -30%, net profit: -51%). However, the mobility business was a positive element as it became profitable for the first time this year, with a high EBITDA margin of 50%. In the long term, this business will need to be expanded if AutoWallis is to increase its profit margin.
We expect a mid-single-digit CAGR for revenue and EBITDA over the forecast period, so that, excluding acquisitions, revenue could exceed HUF 500bn and EBITDA could exceed HUF 25bn by 2029. Free cash generation could exceed HUF 10bn from 2026 onwards.
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