Volkswagen: Current Value Is Underappreciated (OTCMKTS:VLKPF)

Currently, Volkswagen AG’s market cap is €75 billion (OTCPK:VWAGY) (OTCPK:VLKAF) (OTCPK:VWAPY). Despite the current P911 IPO, the corporate is constant to be the main shareholder. Here on the Lab, we already supplied varied updates on Volkswagen Group and as a reminder in our sum-of-the-part valuation, we stated:

Aside from the particular dividend already distributed, yesterday P911 announced a core DPS of €1. In element, regardless of a sophisticated financial state of affairs, P911 confirmed the medium and long-term aims with a ROS between 17% & 19% and an anticipated turnover between €40 and €42 billion. At writing time, P911’s market cap stands at €100 billion and in Volkswagen SOTP valuation, we then derive a price of €75 billion (which is already equal to its present market cap). If we worth Traton (a listed firm) during which Volkswagen has an equity stake equal to 89.72%, we improve our price by an extra €7.7 billion. Even if they’re personal (nonetheless absolutely owned by Volkswagen), we also needs to point out Lamborghini and Bentley. Considering a 30% low cost in comparison with Ferrari, we must always (once more) add at the least an extra €30 billion in equity worth. Even assigning no worth to Audi, Volkswagen, Skoda, and Ducati (all in income), and contemplating the corporate’s money & money equivalents (€36.5 billion), we pretty assume that Volkswagen Is Really Undervalued with at the least a reduction of 58%.

This fall and FY outcomes

Looking on the carmaker’s financials, regardless of a lower in volumes (-7%), gross sales elevated by 12%. Going all the way down to the P&L, the corporate’s working revenue earlier than particular objects reached €22.5 billion and was up by 13% in comparison with the 2021 account, and demonstrated Volkswagen Group manufacturers power, continued value self-discipline, and a stronger mannequin combine. On a damaging word, the corporate’s automotive division’s internet money stream considerably decreased to €4.8 billion attributable to increased working capital necessities for provide chain disruptions. However, the administration word that this damaging impact will largely reverse in 2023. With an order guide of roughly 1.8 million vehicles and a novel product portfolio, the corporate expects a constructive 2023 and an easing in logistics bottlenecks.

BEV and CAPEX

Electric automobile deliveries accounted for 7% of VW output and elevated by 26% in comparison with 2021 for a complete of 572,100 items. With further fashions anticipated to be launched in 2023, Volkswagen Group will remain the EU BEV leader and by 2025, in line with the corporate’s estimates, one out of five VW cars might be electrical. In China solely, EVs elevated by 68%. Despite that, Volkswagen is able to speed up its electrical automobile investments. Between 2023 and 2027, the German large will make investments €180 billion in what it considers “the most profitable areas” of its enterprise: the manufacturing of battery cells, the digitization of China, the enlargement of its presence in North America, and the event of its flagship autos. The stable monetary place ought to permit the producer to “continue to invest” in these areas even “in an economic context full of challenges“.

€15 billion will even be allotted to the development of a cell manufacturing unit referred to as PowerCo, a subsidiary absolutely energetic within the battery enterprise. Yesterday, the company announced the development of a gigafactory in Canada with exercise beginning in 2027. By 2030, PowerCo is predicted to generate an annual turnover of over €20 billion. As for combustion engines, the group plans to proceed investing within the newest technology fashions, with a peak in 2025 after which a gentle decline.

Conclusion and Valuation

Here on the Lab, we’re assured within the worth recognition of VW’s high product portfolio and the Porsche IPO was a constructive affirmation of its underlying power, which amongst different property, as already talked about, additionally contains the posh manufacturers Bentley and Lamborghini, and a premium model equivalent to Audi. Our inside staff continues to imagine that this present worth is underappreciated, and particularly, Volkswagen is positioned to be a quantity chief within the EV section. Aside from our SOTP valuation, with a present P/E of 4x, we imagine that the German automobile producer is discounted. Our EPS estimates for 2023 stand at €32.70 and with a P/E of 6x, we absolutely confirmed our goal worth of €202 per share.

Editor’s Note: This article discusses a number of securities that don’t trade on a serious U.S. change. Please pay attention to the dangers related to these shares.