Forvia (formerly faurecia): Resisting the fall in global automobile production, Forvia jumps on the stock market

(BFM Bourse) – The automotive supplier delivered activity relatively in line with expectations in the third quarter, however clearly outperforming the evolution of automobile production. Which is enough to satisfy a market in total disenchantment with the sector.

If there is one sector for which the market has fallen out of love in recent years, it is automotive equipment manufacturers. Between geopolitical tensions, the health crisis, the “stop and go” of production by manufacturers, the soaring costs of labor and raw materials, and, more recently, fears of a slowdown in electrification and the intensification of competition from Chinese groups, the major players in the sector have been put to the test.

Forvia did not escape the wave. The price of the automotive supplier born from the acquisition of Hella by Faurecia in 2022 collapsed by 57% this year and 80% over three years. But “with such hatred of the sector, it is sometimes enough to deliver a little reassuring elements for the action to take off with a bang”, explains a Parisian analyst.

At the end of September, the group issued a profit warning, thus lowering its outlook for 2024. And yet the stock rallied 11% over one session, because the market feared much worse.

This Monday, Forvia shares climb again, gaining 9% around 10:50 a.m., after revealing its activity in the first quarter. The equipment manufacturer also leads the other stocks in the compartment in its wake, OPMobility taking 4.5% and Valeo 3.6%.

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Force in Europe

The group’s performance is not, strictly speaking, stunning. “But given the disenchantment with automotive equipment suppliers, an online publication is enough to bring action,” underlines the Parisian analyst.

Over the period from July to the end of September, Forvia generated revenues of 6.53 billion euros, down 2.6% in published data, due in particular to a fairly significant impact of foreign exchange (1.6 points percentage).

Bernstein notes that the revenue amount is 0.6% lower than expected. On the other hand, excluding currency and scope effects, the decline in Forvia’s turnover is limited to 0.4% when analysts were expecting a drop of 2%, Bernstein also notes.

With this 0.4% decline in sales, the French group clearly outperformed the trend in global automobile production which fell by 4.6% over the period. Outperformance, a widely followed indicator in the OEM sector, stood at 4.2 percentage points.

Forvia especially outsmarted the situation in Europe, a region where the company implemented a restructuring plan at the start of the year, with 10,000 job cuts planned. In Europe, Forvia sales increased by 4.5% on a like-for-like basis when automobile production fell by 6.9%, resulting in an outperformance of 11.4 percentage points.

The group explains this outperformance by the good dynamics of its seating, interior equipment and lighting activities.

In the Americas region, the group’s sales increased by 2.4% over the period, outperforming automotive production by 4.8 percentage points. On the other hand, in Asia, turnover fell by 9.9% on a like-for-like basis when production fell by 3.8% over the period.

“This underperformance reflects a still high basis of comparison in the third quarter of 2023 (organic growth of 11.8%) and a postponement of production starts. Sales made with Chinese and international manufacturers recorded double-digit organic declines ( higher for international manufacturers),” explains the company.

Visibility in question

At the end of this quarter, the company confirmed that it is targeting revenues of between 26.8 billion and 27.2 billion euros for 2024, an operating margin of 5% to 5.3%, a net cash flow of ‘at least 550 million euros and a ratio of net debt to adjusted gross operating profit (Ebitda) less than or equal to two at the end of 2024 and less than 1.5 at the end of 2025. “In a quarter where production automobile industry fell by 4.6%, we think this is an encouraging publication,” judges Bernstein.

“The message is intact, there is no additional bad news, cost reductions are accelerating, outperformance is better than expected, they expect to return to outperformance in Asia next year and they confirm the trajectory of debt reduction”, appreciates the Parisian analyst previously cited.

“If this publication and the recent warning on the year have made it possible to improve visibility at the end of the year, uncertainty remains high over the 2025 financial year, which management anticipates will be difficult again and on which it does not wish to change. “elsewhere not (anymore) to commit before next February after the recent disappointments This encourages us to maintain our caution on the stock, and more generally on the equipment manufacturer segment, while waiting for better visibility”, slice of. its Oddo BHF side.

“The disposal schedule, a key element in the priority of debt reduction (even more so after the recent warning), remains uncertain in the face of the deterioration of the environment despite the confidence displayed by management,” continues the office. studies.

Julien Marion – ©2024 BFM Bourse