AutoWallis: Turnaround in profitability still pending
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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.
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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.
We have updated our DCF model and earnings estimates following the latest quarterly results. As a result, we are lowering our 12-month target price to HUF 198, while maintaining our Buy recommendation. The Distribution Business Unit has faced significant profitability challenges this year, driven by delays in market launch of certain models, re-branding issues, and inventory write-downs. These factors have led us to cut our profit forecast for the current year. In addition, last year’s acquisitions have resulted in higher-than-expected costs.
On a more positive note, the European car market indicates improvements, with CEE markets — where AutoWallis operates — showing above-average growth. This trend could support a stronger performance in 2026, when the impact of recent acquisitions will begin to normalize.
In response to the Distribution BU’s difficulties, management has initiated measures aimed at improving profitability. While the quantitative impact of these actions remains uncertain, we expect rationalization efforts to focus primarily on personnel expenses and services.
Following the model update, we expect single-digit CAGR (8.2%) and EBITDA growth of ~10% over the forecast period. These growth assumptions remain broadly unchanged; however, the anticipated recovery in profitability has been pushed further out. Our revised model excludes any future acquisitions, implying revenue could exceed HUF 590 billion by 2029, with EBITDA surpassing HUF 33 billion. These figures fall short of management’s targets, largely due to the absence of further acquisition-driven growth in our assumptions.
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