WOOD Flash – Ford Otosan: announces role in Ford Motor-Volkswagen strategic alliance; EUR 1.4bn capex programme
Yesterday (16 March), Ford Otosan (FROTO) made the long-awaited announcement on its role in the Ford Motor-Volkswagen strategic alliance. The company will be producing one-tonne MCVs for both OEMs, starting from 1H23E, for the 11-year lifecycle of the vehicles. FROTO expects the estimated capex of EUR 1.4bn (TRY 12.5bn) to increase the capacity of the model to 405k units (from 180k units now), and cover the production of diesel, PHEV, and BEV vehicles. This EUR 1.4bn investment is the biggest portion of the EUR 2.2bn capex programme, which also includes the construction of a battery assembly facility (130k unit capacity) – making FROTO a fully-integrated producer of EVs. The capex programme is an important step for FROTO’s role in the sector, which is moving away gradually from ICE technology, but we see little changing operationally in the near term. That said, on our 2021E P/E multiple of 21x, FROTO trades at a large premium vs. Tofas (7.2x), which saw a smaller uptick in terms of its share price from the completed merger between FCA-PSA in January. We believe that Tofas could also play an important role in the post-merger dynamics, and it is our preferred choice in the sector for now.Ford Otomotiv Sanayi is an automobile manufacturing company based in Turkey. Co. operates as a joint venture between Ford Motor Company and the Koc Group of Companies. Co. is engaged in manufacturing, assembling and selling motor vehicles, primarily commercial vehicles, imports and sells passenger cars and manufactures and imports and sells spare parts of those vehicles. Co. has two plants located in Kocaeli and Eskisehir, has a spare part distribution warehouse in Kartal, Istanbul and a branch in Tubitak Marmara Research Centre, Gebze Campus Technological Free Zone (TEKSEB).
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