Renault Earnings: Encouraging Performance, but Marred by Currency Headwinds
No-moat Renault reported first-quarter group revenue of EUR 11.7 billion, up 5.9% in constant-currency terms from the prior year and a touch ahead of FactSet consensus. The top-line beat was partly driven by strong performance from Renault’s financial services business, up 30.7% year on year in constant currency, derived from higher interest rates. Automotive, which accounts for 90% of group sales, saw revenue fall 0.7% compared with the same period last year. Strong pricing, which contributed 4.1% to the segment, was more than offset by the negative 4.7% attributed to currency headwinds, with the devaluation of the Argentinean peso singled out by management. In constant-currency terms, automotive grew 3.6%. While registrations increased by 2.6%, destocking from independent dealers contributed to a negative 4.6% volume effect on automotive segment sales year on year. Renault reiterated full-year guidance of at least EUR 2.5 billion free cash flow and at least a 7.5% operating margin. With 10 new model launches planned for 2024 across the group and a strong order book at 2.5 months, we believe these targets are achievable despite the macroeconomic backdrop. The French automaker discloses only revenue in the first and third quarters, while full financial statements are reported for the half and full year. With no changes to our forecasts, we maintain our fair value estimate of EUR 65.