Stellantis N.V. Motor Vehicles

13 thg 5

Key arguments in support of the idea.

• The Company's supplies may recover in the second half of the year.
• STLA's valuation relative to its peers looks very cheap.
• Completion of the 2024 share buyback program may support the stock.

Investment Thesis

Stellantis N.V. (STLA) is one of the largest automakers in North America and Europe,
engaged in a full range of operations from design to sales of finished cars. The
Company has a diversified line of auto brands in different segments, including
Jeep, Fiat, Peugeot, Maserati, Dodge, Opel, and Chrysler. Stellantis is one of the
world's top five automakers by passenger car deliveries.

For the first-quarter Stellantis reported a drop in shipments as the carmaker
prepares to release a number of new models this year. Last quarter, the European
concern delivered 1.37 million cars, representing an 11% decrease year-on-year.
The drop in deliveries led to a 12% y/y decline in Q1 net revenues to €41.7 billion.
Management said that year-over-year shipments were difficult due to transitions in
its next generation product portfolio manufactured on new platforms. Stellantis
plans to launch 25 new models in 2024, and 18 of those will go on sale with
electric power (BEV). Notable announcements include the launch of the
redesigned Ram 1500 pickup in March, the start of deliveries in the second quarter
of the Citroën ë-C3 and Peugeot E-3008 electric SUVs, and the third-quarter
launch of the Jeep WagoneerS and Dodge Charger Daytona electric vehicles. We
believe that the release of new models will lead to a stabilization of the Company's
deliveries in the second half of the year. Also notably, the euro/dollar exchange
rate is near 2023 levels, which should help the carmaker maintain its margins, as a
significant part of its assembly plants is located in Europe.

The selloff in STLA amid weak Q1 sales boosted the stock's upside potential. The
Company costs significantly less than its European and North American peers. Current valuation of Stellantis N.V. as per EV/EBITDA’2024 multiple is 1.2x. At the
same time, the median value of this multiple for the 15 largest companies in the
industry is 6.0x. The Company's shares look oversold given that net income
margins are in line with industry averages and the net debt is negative.

Stellantis approved a share buyback of €2.0 billion to be executed by the end of
2024. In mid-February, the automaker announced a new €3.0 billion share
repurchase program for 2024, double the program for 2023. The Company intends
to cancel the common shares acquired through the €2.5 billion buyback program.
From Feb. 28 to April 29, Stellantis purchased €1 billion worth of its common
shares. Thus, investors will receive an additional 3.3% of the group's market
capitalization as of May 2, in addition to the dividend already paid for 2023, by the
end of the year. We also estimate the forward dividend yield of STLA stock at 7.2%,
and the dividend in 2025 could be $1.57 per share traded on the NYSE.

The stock is an attractive buy given that its valuation relative to peers is very cheap.

Our target price for STLA is $24.8. A stop-loss order is recommended at $19.2