Mercedes-Benz: Combining Value And Growth

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We conscionable vanished nan Q4 and FY expert telephone pinch Mercedes-Benz (OTCPK:MBGYY, OTCPK:MBGAF). Here astatine nan Lab, we person a long-standing bargain standing target connected nan German car manufacturer, this is based on our 'Haute Car Luxury Proposition position To afloat value In'. Our finance thesis was based connected 2 pillars: 1) amended operating leverage acknowledgment to Mercedes's worth connected "produce less cars astatine much premium prices" and 2) nan company's liquidity to organically turn its EV section acknowledgment besides to a reliable and changeless free rate travel generation. In addition, successful 2022, we positively position nan Daimler Truck (OTCPK:DTRUY) spin-off, this provided much net visibility and semipermanent superior appreciation for nan car business. For nan supra reason, we are not amazed to person recorded a affirmative stock value appreciation compared to nan S&P 500 return.

Mare Evidence Lab's erstwhile publication

Before commenting connected Mercedes's accounts, we would for illustration to remark connected our 2 finance pillars. In detail, top-line luxury income accrued from 15% to 16% of nan full company's 2022 turnover, confirming our finance constituent 1). Top-end income accrued by 7.5% this affirmative inclination was supported by G-Class, AMG, and Maybach. This was besides coupled pinch Mercedes-Benz EV's outstanding capacity which accrued by 23% connected a yearly ground (Fig 1). FCF was unchangeable betwixt Q2 and Q3; but successful nan past quarter, Mercedes's nett liquidity from nan business business accrued to €26.6 cardinal compared to nan €21.0 cardinal achieved successful 2021 end. As already mentioned, this was supported by its business rate travel procreation which accrued from €7.9 cardinal to €8.1 cardinal (Fig 2).

Fig.1 - Mercedes Luxury and EV improvement (Mercedes-Benz Q4 and FY 2022 results presentation)

Fig. 2 - Mercedes' business liquidity improvement (Mercedes-Benz Q4 and FY 2022 results presentation)

Going deeper into nan quarterly accounts and starting pinch nan apical line, income accrued to €150.0 cardinal and were up by 12% connected a yearly basis. A affirmative capacity was recorded astatine nan EBIT level too, adjusted EBIT was up by 20% year-on-year. This was backed by: 1) a somewhat accrued successful volumes, 2) higher nett pricing and 3) favorable merchandise MIX; however, this affirmative trajectory was partially offset by Mercedes's financials section which recorded an EBIT alteration by 30% owed to higher costs of in installments for nan expanding liking rates.

Fig 3 - Mercedes financials successful a Snap (Mercedes-Benz Q4 and FY 2022 results presentation)

Conclusion and Valuation

First of all, we would for illustration to study the pursuing statement:

In its first twelvemonth aft nan Daimler Truck spin-off, nan Mercedes-Benz Group continued its translator amid geopolitical and macroeconomic challenges. Strong results underline nan improved profitability, moreover arsenic nan COVID-19 pandemic and semiconductor supply-chain bottlenecks and nan fallout from Russia's warfare against Ukraine continued to impact nan business.

During nan Q&A expert call, this was emphasized by Mercedes's CEO and is precisely what we person been saying successful nan past mates of months. Regarding our dividend investors, Mercedes decided to summation its DPS from €5.20 to €5.00 (up 4%) and besides announced a stock buyback for a full information of €4 cardinal to beryllium repurchased complete nan adjacent 2 years. This was positively invited by nan market, and Mercedes is up by much than 3% arsenic we analyse its accounts.

Last time, successful our projections, we were estimating a value summation CAGR of 5% by 2025 pinch an mean car unit value from 70k to €85k. This was confirmed by nan CEO's latest indication. Mercedes's 2023 outlook forecast gross successful statement pinch 2022 performances pinch EBIT somewhat beneath nan erstwhile year's number and confirmed FCF estimates. The company's package superior marketplace time and caller EV will beryllium cardinal catalysts for 2023. In nan meantime, Mercedes EPS reached €13.55 successful 2022, and applying our 7x P/E aggregate (still utilizing a P/E astatine a important discount versus its 10-year humanities average), we decided to summation our bargain standing target from €74 to €85 per stock ($22.5 successful ADR) - (still applying a 10% holding discount).

Fig 4 - Mercedes dividend and buyback (Mercedes-Benz Q4 and FY 2022 results presentation)

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Buy-side hedge professionals conducting fundamental, income oriented, agelong word study crossed sectors globally successful developed markets. Please sprout america a connection aliases time off a remark to talk ideas.DISCLOSURE: All of our articles are a matter of opinion, informed arsenic they mightiness be, and must beryllium treated arsenic such. We return nary work for your investments but wish you champion of luck.