AutoWallis: Earnings Recovery Delayed
Related content
Hungary: Despite the lower-than-expected headline inflation data the picture is not as rosy as it first appears
Hungary's headline inflation increased to 1.6% year-on-year in September from 1.3% in August. The published data was lower than the consensus and our forecast (both 1.8%). The lower-than-expected inflation was due to above expectation core inflation but a bigger than expected decline in food prices and a decrease in administered prices.
Commodities - Technical Analysis
Gold and silver continued their correction and even dropped below key support levels, so it’s best to postpone buying for now. The price of oil has narrowed significantly between the $87.50 level and the trend line, so any significant movement will likely require a breakout from this zone. Natural gas has retested its uptrend line, but buyers continue to show strength.Copper appears to be developing a broader trading range, making oversold and overbought zones potentially more attractive for trading opportunities. Wheat and corn continue to trade in a correction phase, while moving closer and closer to their key support levels.
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.
Get more out of your investments!
Global Markets Services
OTP Global Markets offers a broad range of services in the field of local and international money and capital markets.
Read morePrivate Banking Services
Personal care and expertise with OTP Private Banking, along with the knowledge, security, and innovations of a multinational banking group.
Read more