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04 May 2023
1Q23: Enjoying the last laugh
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1Q23: Enjoying the last laugh
Bayerische Motoren Werke AG (BMW:ETR) | 0 0 0.0%
- Published:
04 May 2023 -
Author:
Pearson Stuart SP | Cresswell Dorothee DC -
Pages:
13
BMW remains well placed not only to deal with upcoming macro challenges but also in the context of intensifying BEV competition. We stick with Outperform and confirm BMW as our top OEM pick.
What did we learn from the quarter?
BMW delivered a resounding Q1 beat, with an impressive underlying auto margin of 13.4% (once adjusted for BBA related PPA). Reassuringly, financial services also contributed to a strong group ebit (+33% vs consensus). Although Q1 would, in our view, have merited a hike to the FY outlook, this was perhaps too much to expect from a conservative management team, even if guidance was refined to the upper end of the auto margin range. Moreover, commentary around near-term demand and pricing dynamics was encouraging, with BMW''s prospects enhanced further by supportive product momentum, particularly at the upper end of the line-up (7, X5, X6, X7, XM). Yesterday''s approval of another EUR2bn share buyback program was not unexpected but should help cement the group''s growing reputation for shareholder ''friendliness''.
How does it change our investment view?
We have argued for some time that BMW is relatively well placed in the context of growing cyclical challenges thanks to a supportive model mix, something we expect to become increasingly evident through the coming quarters. Perhaps even more importantly, however, is BMW''s consistent delivery when it comes to electrification. Its frugal flexible platform approach until mid-decade, when growing BEV volumes will merit a switch to the single dedicated NK platform, is beginning to look exceptionally smart. Moreover, we note that BMW has even started to make inroads into the challenging Chinese BEV market - and that''s before the launch of further key new electric products.
Earnings, rating and target price changes
We have adjusted our forecasts to reflect Q1''s results and commentary (ebit +11% for 2023, +6% 2024) and the second buyback program. Our price target increases to EUR127 as...