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Buy Signal on Michelin (ML-FR)

19/11/2021
We had an Enter Long Strategic signal on November 10, 2020, triggered by our system on Michelin, ML-FR, the French Tire manufacturer.

Our system also triggered an Enter Long Tactical signal on November 18, 2021 that imply a likely bullish acceleration. Michelin has a rather weak track record, with a Behavioral score of 1/10, therefore the signal looks mainly Tactical.

Michelin is a €24 Bn market cap and a world leader in the manufacture of tires. The group's products are mainly marketed under the Michelin, BFGoodrich, Kleber, Uniroyal and Taurus brands. Tires for light vehicles represent 50 % of revenues, heavy vehicles 25% and specialty vehicles 25% including agricultural and civil engineering machinery and airplanes.

Michelin is currently a safe haven in the Automotive sector as its tire are both intended for the replacement market and for the original equipment market. This limits its sensitivity to new vehicle registrations.

Michelin has a strong pricing power in an inflationnary environment, while utilization rate in Group manufacturing centers are at maximum level.

In the longer term, Michelin intends to return to "sustained growth" in its turnover by 2030, in particular thanks to its diversification into hydrogen fuel cells, the medical sector, technological solutions or printing. 3D metal.

For 2021, Michelin is expected to post € 23 Bn revenue coupled with a 12.5% EBIT margin, and EPS are expected to grow at double digit pace in the next 2 years. The stock currently offers a 3.2% dividend yield.

Short term catalyst : Strong pricing power.

This signal looks consistent with the European Automotive & Parts sector in major bullish trend. There is a strong participation to the short term, with 75% of European Automotive & Parts in tactical signal but still only 33% in strategic signal.