Auto suppliers 'can't have it all', Jefferies sees inflation risks

Vitesco Technologies AG

20/01/2023 09:40

** Jefferies sees more risks related to inflation than to
volume for auto suppliers, noting the sector has too much
confidence in the ability to pass through above-normal costs
inflation
    ** "Suppliers can't get both volume and price, in our view,"
Jefferies says, expecting less downside to volume and more risks
related to wages and energy inflation compensation
    ** It cuts 2023 estimates by more than 15% to reflect higher
interest cost and no price compensation related to wages and
energy
    ** The broker remains cautious on suppliers with weak FCF
conversion and high leverage
    ** Jefferies double-downgrades Faurecia  EPED.PA  (-3%) to
"underperform", saying earnings risk is not priced in
    ** It downgrades Continental  CONG.DE  (-1.8%) to "hold",
citing lack of near-term catalyst despite attractive valuation
    ** It also cuts Vitesco  VTSCn.DE  (-4.3%) to "hold" as it
reached its PT
    ** It says it fails to see Valeo's  VLOF.PA  ("hold")
outperformance and margins exceeding peers to justify the
valuation premium
    ** It still likes Autoliv  ALV.N  on top-line growth, cost
cuts and potential buybacks acceleration in 2023, as well as
Michelin  MICP.PA  given its price discipline 
 (Reporting by Federica Mileo in Gdansk)
 ((Federica.mileo@thomsonreuters.com))