Valeo: 2018 EPS cut by 7.5% due to WLTP, raw mat. & Valeo-Siemens. We cut our rating from Buy to Neutral
Valeo: (NEUTRAL vs. BUY, Fair Value EUR61 vs. EUR65 (+26%))2018 EPS cut by 7.5% due to WLTP, raw mat. & Valeo-Siemens. We cut our rating from Buy to Neutral
Valeo posted yesterday H1-18 metrics in line with estimates yet 10% below consensus on net income due to higher tax rate and stronger losses at Valeo-Siemens. Most surprisingly the management revised down its 2018 sales, margin and net income targets for three different reasons, while three months ago it confirmed its 2018 targets. 2018 is set to be a more complex transition year for the group than firstly anticipated. Despite positive upside vs. latest share price, even after a EUR3/sh cut to our FV, from EUR65 to EUR61 to reflect the 7.5% our 2018 EPS est., we decided to downgrade our rating from Buy to Neutral. We do not expect the stock to outperform the SXAP index anymore over next six months.
Valeo is an automotive supplier, partner to automakers worldwide. As an industrial and technology company, Co. focuses on designing, manufacturing and selling components, integrated systems and modules for automobiles and heavy goods vehicles, both on the original equipment and the aftermarket segments. In addition, Co. offers innovative products and systems that contribute to the reduction of CO2 emissions and to the development of intuitive driving to its customers. Co. operates through four business groups: Comfort and Driving Assistance Systems, Powertrain Systems, Thermal Systems, and Visibility Systems.
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