Berenberg eyes tyre returns 'where rubber meets cash'

Continental AG

13/01/2026 06:46

** Berenberg says that among European tyre makers investors should own those that can consistently generate and return cash, viewing them as "highly cash-generative assets"

** "Replacement tyres represent c75-80% of global tyre demand versus new vehicle tyres, which offer greater through-cycle earnings and free cash flow stability relative to other automotive suppliers," says the broker

** It favours Italian tyre maker Pirelli PIRC.MI, starts coverage with "buy" rating, citing its leadership in high-value tyres, efficient low-cost production, and a potential resolution of a governance overhang in H1 2026 as key catalysts

** "Pirelli is approaching its 1x leverage target, which leaves room for substantial cash returns via increased dividend payout and/or the initiation of a buyback programme," adds the broker

** Berenberg initiates French peer Michelin MICP.PA with a "hold" rating, citing a less compelling production footprint and cyclical headwinds in non-passenger segments

** The broker also cuts Continental CONG.DE to "hold", saying it believes much of the upside from its sum-of-the-parts valuation after planned sales of its rubber and plastics division is priced in

     RATINGS AND PT CHANGES

COMPANY
RATING
OLD RATING
PT
OLD PT
Pirelli PIRC.MI
Buy
-
8 euros
-
Michelin MICP.PA
Hold
-
28 euros
-
Continental CONG.DE
Hold
Buy
74 euros
82 euros

(Reporting by Dimitri Rhodes in Gdansk)

((dimitri.rhodes@thomsonreuters.com))