European Investment Bank Partnership And EV Financing Will Unlock Opportunities

Key Takeaways

• Strategic focus on profitable growth and EV market dynamics is driving revenue growth and enhancing net margins through synergies.
  
• Plans to expand product offerings and partnerships indicate potential for increased revenue and improved profit margins.
  
• Uncertainty in used car market and regulatory conditions may impact revenue, while strategic pressures could hinder growth and reduce margins.

Catalysts

Engages in the provision of service leasing and vehicle fleet management services in the Rest of Europe, Latin America, Asia, and internationally.

• Ayvens has implemented a strategic portfolio reshaping and is focusing on profitable growth, including a targeted commercial momentum towards profitable client segments and adaptation to EV market dynamics, which is expected to drive revenue growth.
  
• The company has accelerated its integration and transformation journey, with synergies from integration efforts contributing significantly to revenue and operating expenses improvements; these synergies are likely to continue enhancing net margins.
  
• Ayvens plans to expand its product offerings, including multi-cycle leases and insurance, which are expected to open new revenue streams and improve profit margins due to higher service income.
  
• The partnership with the European Investment Bank for financing electric light commercial vehicles and expanding partnerships with OEMs indicate potential for increased revenue through fleet expansion.
  
• Ayvens' financial strengthening, including higher gross operating income and strong net margin growth, positions it well for earnings growth, especially as depreciation adjustments on used cars stabilize and prospective depreciation release reduces over time.

Ayvens Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ayvens's revenue will grow by 2.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.4% today to 4.4% in 3 years time.
• Analysts expect earnings to reach €1.2 billion (and earnings per share of €1.45) by about May 2028, up from €610.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.8x on those 2028 earnings, down from 11.9x today. This future PE is lower than the current PE for the GB Transportation industry at 82.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.53%, as per the Simply Wall St company report.

Ayvens Future Earnings Per Share Growth

Risks

• Ayvens faces uncertainties related to the used car market, especially concerning the potential impact of auto tariffs and the volatile nature of electric vehicle residual values, which could affect future revenue.
  
• Despite a strong Tier 1 capital ratio, there is uncertainty regarding capital returns, which might be contingent on regulatory clarity around its U.K. motor finance exposure, potentially impacting shareholder value enhancement through extraordinary distributions.
  
• Although current margins are high, the need to potentially adopt more aggressive pricing strategies to reignite growth may lead to a future margin compression, impacting net margins.
  
• Revenue growth might be hindered by de-fleeting in key markets such as the U.K. and Germany, resulting from restructuring and a strong focus on profitability, which could temporarily reduce fleet volumes.
  
• Slower-than-expected progress in increasing EV penetration and achieving synergies from integration and transformation could impact both revenue generation and cost efficiencies, affecting overall earnings.

Valuation

• The analysts have a consensus price target of €9.304 for Ayvens 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 €12.0, and the most bearish reporting a price target of just €6.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €27.4 billion, earnings will come to €1.2 billion, and it would be trading on a PE ratio of 7.8x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of €8.91, the analyst price target of €9.3 is 4.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.