'Coming together at last, at a fair price' - Jefferies starts Volvo Cars with 'hold'

Volvo Car AB

07/03/2024 14:12

** Jefferies starts Swedish car manufacturer Volvo Cars
 VOLCAR.ST  with "hold" citing removal of major overhangs and
scaling up of battery electric vehicles, but says the shares are
close to fair value
    ** It says Volvo Cars removed two major overhangs by
focusing on 50% BEV penetration and a 8%+ margin by 2026, and
capping financial support to Polestar  PSNY.O  
    ** Having ruled out additional financial support to
Polestar, Jefferies sees Volvo Cars as adequately funded to see
through two years of heavy investment and low FCF
    ** The broker also sees margins improving through 2026 to
about 6.7% on better BEV contribution from scale and material
costs, while BEVs remain mostly dilutive across the industry
    ** "We expect product cycle and BEV operating leverage will
drive 3-year CAGR revenue and EBIT growth of 10% and 21%
although FCF should remain modest until 2026 on high capex and
WC absorption," Jefferies adds
    ** In general, the broker sees EV business models, funding
plans and governance to be tested in 2024, but says sentiment
may already be near a low point
    ** The post-earnings rally took shares close to fair value,
Jefferies says and sets PT at SEK 39, a 12% upside to
Wednesday's closing price


 (Reporting by Elsa Ohlen)
 ((elsa.ohlen@thomsonreuters.com;))