Buy Signal on Valeo (FR-FR)
Valeo is a €6.9 bn market cap and one of the world leaders in the manufacturing of automotive equipment. Revenues are split between 4 main segments including 1/Visibility systems (30% of sales) including lighting systems and wiping systems, 2/Propulsion systems (26% of sales) designed to reduce CO₂ emissions and fuel consumption, power train electrification systems, transmission automation for all gearboxes automatic speeds and air loop management solutions; 3/Thermal systems (23% of sales); and 4/Comfort and driver assistance systems (18% of sales) including innovative human-machine interfaces and vehicles connected offering connectivity solutions ranging from short range to long range connectivity.
The automotive industry faces various challenges that will affect car manufacturers in the immediate and long-term future. The main challenges include battery-powered, driverless and digital technology. In all these areas, Valeo is developing innovative products and is in a good position to remain one of the leading automotive suppliers in the upcoming future.
Valeo is expected to post a loss of €-950m in 2020 and return to profits (€350m) in 2021.
Short term catalyst: China recovery, consumer spending.
This signal is consistent with the renewed momentum in the European Automotive sector.