Regional Localization And Advanced Electronics Will Capture Emerging EV Markets

Key Takeaways

• Expansion into advanced electronics and key global markets supports higher market share and improved margins as auto tech trends accelerate.
  
• Portfolio streamlining and efficiency measures strengthen earnings quality, boost cash flow, and enhance returns through optimized operations and deleveraging.
  
• Elevated transformation costs, reliance on asset sales, exposure to China, slow hydrogen adoption, and currency headwinds threaten profitability, revenue growth, and balance sheet stability.

Catalysts

Manufactures and sells automotive technology solutions in France, Germany, other European countries, the Americas, Asia, and internationally.

• Robust order intake and commercial success in advanced electronics (zone controllers, battery management, radar) and interiors from both Chinese and Western OEMs position Forvia to capture higher market share as the automotive industry accelerates toward EVs and increasingly connected vehicles, supporting multi-year revenue growth.
  
• Regional expansion and manufacturing localization-especially in China, India, and Korea-enhances access to fast-growing markets and leverages local innovations tailored to consumer demand for smart mobility, boosting future sales and improving operating margins.
  
• Ongoing cost rationalization and Project Simplify, with targeted SG&A and process automation initiatives, are expected to drive an additional €110 million in annual savings by 2028, sustaining improvements in net margins and free cash flow.
  
• Strategic divestitures and portfolio optimization focused on core high-growth technologies are underway, with sizable asset disposals planned to accelerate deleveraging, reduce interest burden, and improve earnings stability.
  
• The quality of Forvia's new order backlog, with rising profitability and declining upfront costs, combined with continuing realization of Hella synergies, is set to enhance operating leverage and drive structurally higher returns on capital over the medium term.

Forvia Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Forvia's revenue will grow by 1.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -1.7% today to 3.0% in 3 years time.
• Analysts expect earnings to reach €847.5 million (and earnings per share of €2.3) by about July 2028, up from €-458.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 4.3x on those 2028 earnings, up from -4.8x today. This future PE is lower than the current PE for the GB Auto Components industry at 12.1x.
• Analysts expect the number of shares outstanding to grow by 0.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.02%, as per the Simply Wall St company report.

Forvia Future Earnings Per Share Growth

Risks

• High restructuring and transformation costs-including €150 million tied to Project Simplify and continued restructuring expenses for EU-FORWARD and North America-pose a risk to medium-term net income and free cash flow, especially as major portions of savings and synergies may not be fully realized until 2028.
  
• Dependence on successful sizable asset disposals creates uncertainty; delays or unfavorable market conditions could hinder achievement of leverage targets (1.5x in 2026), impacting investor sentiment, balance sheet strength, and increasing refinancing risk.
  
• Exposure to China as the first country for sales brings risk from potential trade barriers, heightened geopolitical tension, local overcapacity, and an ongoing automotive price war, all of which could depress revenues, margins, and market share in a highly volatile environment.
  
• Slow adoption and declining investment in hydrogen technologies, highlighted by the loss of Stellantis as a major customer (80% of expected SYMBIO JV volumes), reveal vulnerability to disruptive technological shifts and changing customer strategies, undermining previously anticipated revenue streams and asset values.
  
• Currency headwinds-including euro strength against the US dollar and Chinese yuan-have already reduced reported sales and are expected to cut at least €500 million from H2 revenues; sustained forex volatility will continue to pressure top-line growth and operating margins, especially given the global revenue footprint.

Valuation

• The analysts have a consensus price target of €13.062 for Forvia based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €39.0, and the most bearish reporting a price target of just €7.3.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €27.9 billion, earnings will come to €847.5 million, and it would be trading on a PE ratio of 4.3x, assuming you use a discount rate of 12.0%.
  
• Given the current share price of €11.2, the analyst price target of €13.06 is 14.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.