Renault: Alpine Brand Investor Day Reveals Ambitious Revenue Growth and Margin Expansion

No-moat Renault RNO held an investor day for its Alpine brand, during which management set an ambitious revenue growth target and substantial margin expansion. Alpine started life in the 1950s as the tuner brand of Renault, and became well known for rally racing in the early 1970s. Alpine as a brand was dropped by Renault in 1995 but the A110 model, which had a production run from 1968 to 1977, and the Alpine brand were relaunched in 2017. The Renault Formula One race team changed its name to Alpine in 2021 to promote its racing heritage.

For 2023, management expects revenue of less than EUR 1 billion and an operating loss. In 2026, management targets EUR 2 billion in revenue but breakeven operating income as Alpine launches new models and begins to expand outside of France. In 2030, the target revenue is raised to EUR 8 billion (40% annualized growth from 2022) with an operating margin of 10%. Management intends to launch six more models through 2030, in addition to the A110 currently on sale, all on one platform, the Alpine Performance Platform, or APP. The firm says that the APP will be modular, being able to expand in width and length, and be fully electric. While all future models, including the A110 replacement, will be all-electric, management said it is looking into hydrogen internal combustion.

We like that the firm is trying to leverage its Alpine brand racing heritage by utilizing disciplined capital investment in a single platform to support model expansion. However, recent spin-offs like Ferrari and Porsche, whose brands were also built on a motorsport history, were already well established among international consumers. While it may be possible for Alpine to expand its market appeal outside of France and Europe, we think it will be challenging to achieve the global revenue management targets by 2030. Our Renault EUR 83 fair value estimate is unchanged. The 5-star rated shares currently trade at an attractive 57% discount to our fair value estimate.