Renault Wins Plaudits Boosted By Russia, Emerging Markets.
“Renault remains our relative preferred name as we view its earnings profile as more resilient and sustainable than peers”
Renault is winning plaudits for its prospects in general and investments in Russia and the third world in particular, and investors are beginning to see the light.
Bernstein Research analyst Max Warburton is getting nervous after placing Renault on a negative list earlier this year, and is reappraising his advice.
“Renault’s sales growth has been impressively strong this year. It has been a market share gainer this year in Europe and its mix – and probably its net pricing – has improved. In Russia, a potentially key market for Renault, it is making notable progress. We are upgrading out estimates substantially,” Warburton said.
Will Renault eventually merge with its alliance partner Nissan and unlock much hidden shareholder value?
“The idea is now so old it probably needs a double hip replacement. But the latest hope is that the Macron government will be more supportive of such a move. Perhaps, but we still see the chances as low; it’s important to recognise that (President Emmanuel) Macron was the very man who increased the government stake in Renault in 2015,” Warburton said.
Despite reports that Macron was against selling off the government’s 14 per cent stake in Renault, some see a greater chance of a sale of at least part of the stake to fund his pledge to raise €10 billion to promote industrial and research projects. Renault owns 44 per cent of Nissan, and Nissan owns 15 per cent of Renault.
Berenberg Bank is a little less enthusiastic.
Berenberg analyst Alexander Haissl said Renault is under-exposed to two key markets vulnerable to weakness – Germany and Britain – but is overexposed in markets like Russia and Brazil likely to expand quickly.
Berenberg is in the minority in expecting European sales to fall 2 per cent in 2017, driven by Germany – down 4 per cent – and Britain – off 7 per cent
“Renault remains our relative preferred name among the European (manufacturers), as we view its earnings profile as more resilient and sustainable than peers,” Haissl said.
Citi Research is leading the cheering though.
“We view Renault as the best value for growth amongst the (big manufacturers,” said Citi Research analyst Michael Tyndall.
“The earnings outlook for the stock is strong – volumes are growing in Europe despite the tough comparisons. Emerging markets are recovering and Renault is also winning share. We think the first half results will highlight the underlying strength of the core Renault business as well as point to a better outlook for further cost savings,” Tyndall said.
Citi Research does harbour some reservations. The developing scandal in France over diesel technology is a worry, and for while so were the various elections. The latter at least has now receded from view. Probably, given the second round of the French election is still awaited as we go to publication.