AutoWallis: Target price set at HUF 180
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Our Equity Top Pick List
We have updated our Equity Top Pick List to reflect the events of the past quarter. The list includes those stocks, typically US and European ones, that we consider to be proper investment choices from a fundamental point of view. It can provide a starting point for building a sector-diversified equity exposure in portfolios, but can also be used as a watch list. Technical analysis should be used to time / determine the specific investment decision.
Could the momentum return in the semiconductors?
The semiconductor sector has had a challenging quarter, with its performance in recent months lagging behind improvements in underlying fundamentals, even as AI-driven demand remained exceptionally strong. The accelerating adoption of AI by enterprises and the proliferation of AI agents are significantly increasing the demand for computing capacity, which points to a further surge in cloud services and data center investments. Given current supply constraints, record-high backlogs, and higher-than-expected investment needs, we expect further upward revisions to earnings forecasts in the semiconductor industry. Nevertheless, the sector’s valuation appears favorable from a historical perspective, which, in our view, could result in a more attractive risk-return profile in the coming months.
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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