AutoWallis: Earnings Recovery Delayed
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Commodities - Technical Analysis
Both gold and silver have broken their downtrends, with upward waves beginning that may still have upside potential. After a strong retest, the oil price may consolidate within a range, but there are still opportunities for an upward move. Natural gas prices did not reach a new low, but no pattern indicating a reversal has yet emerged. Copper is maintaining its upward trend; it must rise again within a few days, or the rally could break down. Wheat and corn are beginning to turn upward again from key support levels after a strong retest.
FX - Technical Analysis
The dollar weakened against both the euro and the pound to expected levels last week. There are no signs of a reversal in this trend yet; it may even target this year’s price highs against its counterparts. After several weeks of correction, the forint is showing signs of a slight strengthening again. Previous lows could serve as important support levels, and range-bound trading may ensue. The USDJPY price corrected higher following a strong intervention, but the nature of this correction does not suggest new highs. A day of strong yen buying could even lead to a short-selling opportunity. The EURCHF pair remains in an uptrend following a minor correction.
Following the latest quarterly results, we have revised our DCF model and earnings estimates. We cut our 12-month price target to HUF 158 and downgrade the shares to Hold from Buy. The challenges facing the Distribution business unit have not been resolved and, if anything, intensified during the first half of the year. This was the key driver behind our downward revisions to this year’s revenue and earnings forecasts.
Growth also slowed in Retail, while margins remained under pressure. We therefore expect the recovery in profitability to take longer to materialise and to be less pronounced than previously anticipated. Mobility continues to stand out in terms of earnings generation, but its contribution at Group level remains too small to offset the weak performance of the automotive distribution and retail businesses.
Following the model update, we forecast a low-single-digit revenue CAGR of 3.6% and an EBITDA CAGR of 7.4% over the forecast period. As before, our updated model does not incorporate any future acquisitions. On this basis, we expect revenue to approach HUF 570bn and EBITDA to reach approximately HUF 27bn by 2030. These figures are well below management’s current targets, raising the question of whether the financial targets set out in the company’s previous 2028 growth strategy will need to be materially revised.
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