A profound change is currently sweeping through the automotive industry. While the switch from combustion engines to electric vehicles is already a foregone conclusion, autonomous driving is also making progress. More and more Advanced Driver Assistance Systems (ADAS) are being used. These form the basis for highly automated driving.
One important company in this field is Valeo. More than three decades ago, the automotive supplier launched Park Distance Control (PDC) as a world first with its partner BMW. The French company also launched the multi-camera view in the Munich car around 15 years ago. Now the two companies want to further intensify their cooperation. For BMW's "New Class" platform, which is being designed specifically for electric cars and is scheduled for launch in 2025, Valeo will supply the ADAS domain controller, sensors and software for parking and maneuvering.
Valeo's ADAS domain controller will house all the driving assistance functions, as well as BMW and Qualcomm's software for driving automation. The system can thus sense the environment in real time. However, the controller's potential is far from exhausted with this, and new functions are to be added continuously. According to estimates, the total ADAS market will increase eightfold from the current EUR 15 billion to EUR 120 billion by 2035.
With BMW, Valeo has a strong partner at its side. The German premium supplier is currently stepping on the gas on its way to a new automotive future. In the first quarter, BMW sold almost two and a half times as many e-cars as in the same period last year. For the year as a whole, the company aims to sell well over 200,000. By the end of 2025, BMW would even like to have put more than two million fully electric vehicles on the road. According to CEO Oliver Zipse, BMW's "New Class" architecture could then already account for 50% of sales in 2030.
This means that Valeo will have its work cut out for it. This should be to the liking of Christophe Périllat, who took over as Group CEO in February this year. The 56-year-old wants to grow at least 5 percentage points faster than car production between 2022 and 2025. Ultimately, the aim is to achieve sales of more than EUR 27 billion by the middle of the decade. That compares with around EUR 17 billion in 2021, a 5% increase over 2020, which was enough to jet back into the black. In the Corona year 2020, Valeo lost a good billion.
For the current fiscal year, Périllat's plan calls for sales of between EUR 19.2 billion and 20.0 billion, which would represent growth of 11% to 16%. However, geopolitical tensions as well as inflationary pressure will cause profitability to decline. The target is an Ebitda margin of 11.8% to 12.3%, compared with 13.4% in 2021.
The weaker outlook put a heavy damper on Valeo shares. Within a few trading days, the share price plummeted by almost half between the end of February and the beginning of March. After a brief consolidation phase in the EUR 15 range, however, the stock regained significant ground and is now back in the region of the 20 mark. Analysts have recently issued positive ratings. JPMorgan, for example, assumes that the supplier will confirm its annual targets when it presents its half-year figures and that business will pick up in the second half of the year. An evaluation of currently 23 research studies results in an average Hold rating with a price target of 22 euros.
Strictly speaking, Valeo shares do not need to gain a cent to achieve high returns with the new barrier reverse convertibles. Leonteq has structured two new softcallable BRCs that offer double-digit percentage coupons with risk buffers of 40%. The CHF product offers a potential return of 14.00% p.a., while the second variant based on EUR even yields a maximum of 14.40% p.a.. There is even more to be gained with a combination of BMW and Valeo. The multi-BRC on the car duo has an identical risk buffer and a coupon of 16.00% p.a.. All three products have a soft callable feature. The first observation day takes place after six months and is then repeated quarterly.
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