AutoWallis: Driving growth amid market challenges
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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.
We have revised our DCF model and earnings estimates following the latest quarterly report: we raise our 12-month target price to HUF 210 and maintain our Buy recommendation. If the company can successfully continue its acquisition strategy this year, our increased target price could prove conservative.
Currently, the short-term outlook for the European car market is not very supportive (although there has been some positive news recently), but we believe that the CEE markets where AutoWallis operates could grow faster, similar to last year.
In 2024, the company completed two acquisitions in the Czech Republic, the positive effects of which will be fully materialised from this year onwards. These acquisitions will not only increase sales, but also bring economies of scale. In addition, the focus will remain on expanding the higher-margin service business, which should continue to deliver above-industry earnings growth momentum.
Over the forecast period, we expect single-digit CAGR (7.5%) and EBITDA growth of ~10%. The updated model includes last year's two Czech acquisitions but excludes future planned acquisitions, so revenues could exceed HUF 570 billion and EBITDA could reach HUF 32 billion by 2029.
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