Faurecia 2022 Results Mixed on Headwinds and Hella Acquisition; FVE Raised to EUR 45

No-moat-rated Faurecia EO reported a 2022 loss per share of EUR 2.20, well below the FactSet consensus of a EUR 1.27 loss and EUR 2.33 worse than the year-ago earnings per share of EUR 0.13. The chip shortage, Ukraine crisis, higher raw material costs, increased energy costs, problems with a seating program launch in North America, and other inflationary cost pressures contributed to the shortfall. The French auto parts vendor discloses only revenue in the first and third quarters while financial statements are published for half- and full-year results.

We raised our fair value estimate to EUR 45 from EUR 41 due to the time value of money and slight changes to our model. The 5-star-rated Faurecia shares currently trade at an attractive 55% discount to our new fair value estimate.

Faurecia reported EUR 25.5 billion in full-year 2022 revenue representing a 63% increase compared with the prior year due to the acquisition of Hella. Organic revenue rose by 17%, outperforming global light vehicle production by roughly 10 percentage points, as a result of a strong backlog of net new business. Even so, revenue outperformed the FactSet consensus top line estimate by about 2%. Adjusted EBIT was EUR 1.12 billion for a margin of 4.4%, up 29% from EUR 862 million, but a 5.5% margin reported a year ago. While the Hella acquisition and new business supported the growth in adjusted EBIT, margin was negatively affected by the earlier mentioned headwinds and cost recoveries from customers at zero margin.

Management provided 2023 guidance including EUR 25.2 billion-EUR 26.2 billion in revenue and an adjusted EBIT margin of 5%-6% based on flat global light vehicle production. We estimate 2023 revenue at EUR 26.2 billion, but EBIT margin at 5.0%. In our view, new business backlog supports the upper-end of management guidance, but continuing industry headwinds squeeze margin to the low-end.