Bernstein upgraded their coverage of German automaker, Porsche (OTC:POAHY) to a Market-Perform rating (From Underperform) and cut their 12-month price target by €1 to €90.00 as analysts see the company shifting its strategy from model-driven volume growth to a pricing-led model.
“The company's margins have trended in the upper teens, and we see the current strategy to reach 17% to 19% EBIT margin as a realistic outcome,” wrote the analysts at Bernstein in a note.
Nevertheless, Bernstein predicts a more sluggish increase in both volume and pricing, ranging between 4% and 6% per annum, in contrast to the company's projected 7% to 8% growth and the even loftier consensus expectations.
All major markets are showing signs of weaker consumer demand. Due to the importance of pricing and residual values in their strategy, Porsche is expected to limit its growth in the near future.
The delay of the electric Macan in 2024 will add to this challenge. While this delay will help Porsche avoid excessive discounts and continue to benefit from their price increases in 2023, it will also restrict their revenue growth in 2024 and 2025.
Bernstein’s forecast leads to a 5% EPS growth in 2024 and 2025, reaching €5.99 EPS in '24 and €6.33 EPS in '25. These figures fall 5% and 7% below the general consensus.
The company is aiming for a 50% dividend payout, and despite elevated capex, there should be no difficulty in achieving the target. The main risk could arise from any additional technology delays by Volkswagen (ETR:VOWG_p), potentially affecting Porsche's product cycle and necessitating increased investment by the company.