Auto Suppliers_ Our FY 2024 Half-Time Report

Summary of the Conference Call on European Automobiles & Components Industry Overview - The report focuses on the European automotive suppliers industry, monitoring 25 global auto suppliers with combined revenues exceeding €400 billion, which is twice the size of Volkswagen's cost of goods sold [1] - The fourth quarter of 2024 was noted as a weak production quarter, but the outlook for 2025 is the key driver for stock performance [1] Core Insights and Arguments - Mixed Performance: The overall performance of automotive suppliers is mixed, with a median expectation of a ~2% decline in vehicle production for 2025. However, suppliers are optimistic about offsetting this decline through higher content per vehicle or market share gains [2][20] - Stock Reactions: Stock performance varied significantly on results day, with Visteon and Stabilus seeing increases of +5% and +4% respectively, while Autoliv and Gentex experienced declines of -5% and -8% [2] - Production Expectations: Most suppliers anticipate a decline in car production, particularly in Europe and the US. Mobileye predicts a -7% decline in production for its customers, while others expect low single-digit declines [3][20] - Revenue Growth Strategies: Suppliers are focusing on gaining market share and increasing content per vehicle, although achieving simultaneous growth across the sector may be challenging due to cost-cutting measures by automakers [4][24] - Tyre Segment Performance: The tyre segment has shown positive results, with companies like Michelin, Goodyear, and Bridgestone reporting strong margins and benefits from premium pricing strategies [5][29] Additional Important Insights - Cautious Outlook: There is a cautious sentiment regarding the remaining companies yet to report, as they have shown higher year-to-date stock performance compared to those that have already reported [6][11] - Margin Expectations: The median expectation for margins among suppliers is flat, with some companies like Mobileye and Gentex guiding for margin improvements of over 50 basis points [2][26] - Investment Ratings: The report rates Michelin, Bridgestone, Valeo, Forvia, and Stabilus as "Outperform," while Continental is rated "Market-Perform" and Pirelli and OPmobility as "Underperform" [9] Conclusion - The European automotive suppliers industry is facing a challenging environment with expected declines in production, but companies are optimistic about revenue growth through strategic initiatives. The tyre segment appears to be a bright spot amidst the mixed performance of other suppliers. The cautious outlook for the remaining companies suggests potential volatility in stock performance as they report their results.