Volvo (Buy, TP: SEK160.00) - Second round of Covid-19 cuts
We cut our forecasts for Volvo by 10–30% on 20 March following the suspension of production in Europe following the Covid-19 outbreak. Since then, further production stops have been announced in all divisions, leading us to reduce our 2020e adj. EBIT by another 40%, 2021e by 12% and 2022e by 10%. While we have lowered our target price to SEK160 (170) and believe 2020 will be a lost year, we reiterate our BUY based on an attractive valuation, our forecast of a strong earnings recovery in 2021, and a rock solid balance sheet.Volvo is a manufacturer of trucks, buses, construction equipment and marine and industrial engines. Co.'s activities are organized into six areas: Group Trucks, which sells and markets trucks under Eicher, Mack, Renault Trucks, UD Trucks and Volvo brands; Construction Equipment, which includes equipment for construction and related industries; Buses, which includes buses and bus chassis for city, intercity and coach traffic; Volvo Penta, which manufactures engines and drive systems for boats and commercial craft; Governmental Sales, which manufactures special-purpose vehicles; and Volvo Financial Services, providing customer financing and leasing, dealer financing and fee based products.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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