Volvo (Buy, TP: SEK240.00) - Set for handsome dividends
In our view Volvo reported very solid Q4 results, and the strong execution, with adj. EBIT of SEK10.5bn (20% above consensus), bodes well for 2021e. With production gradually increasing in 2021–2022, we expect strong profitability and cash flow generation in the coming years, which should enable strong dividend payouts. We expect a DPS of SEK55 (26% of market cap) over the next three years. Our 2021e adj. EBIT is 11% above consensus. We reiterate our BUY, and have raised our target price to SEK240 (230).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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