HSBC sees volume upside for auto suppliers

Vitesco Technologies AG

16/03/2023 12:24

** Even though auto suppliers began 2023 with fairly
conservative guidance, HSBC expects a positive risk-reward for
light vehicle production (LVP) volumes, as semiconductor lead
times and raw material costs continue to normalise
    ** "We expect a recovery in suppliers' margins driven by LVP
growth and cost recovery," says the broker, noting car makers
like Volkswagen  VOWG_p.DE  and Stellantis  STLAM.MI  have more
upbeat volume expectations for 2023 than suppliers' "fairly
conservative" guidance
    ** "FY22 results confirm suppliers are confident of
recovering higher costs from original equipment manufacturers
(OEMs) and expand profitability," it adds
    ** The brokerage upgrades German electric vehicle (EV)
components producer Vitesco  VTSCn.DE  to "buy" from "hold" on
potential for growth and profitability of the electrification
business
    ** It reiterates a "buy" rating for German automotive
supplier Continental  CONG.DE , noting that Conti Auto should
finally stabilise R&D spending and step up profitability more
than any other supplier in 2023
    ** It says French car parts group Faurecia  EPED.PA  has the
highest potential for earnings growth thanks to synergies from
the consolidation of Hella, holds at "buy"
    ** HSBC also keeps a "buy" rating for Germany's Schaeffler
 SHA_p.DE  and Italy's Pirelli  PIRC.MI 
    ** The brokerage reiterates a "hold" rating for Germany's
Hella  HLE.DE , and French suppliers Michelin  MICP.PA  and
Valeo  VLOF.PA 

 (Reporting by Anna Mackenzie)
 ((Anna.mackenzie@thomsonreuters.com))