CON GR

Continental AG

Industrial/Transportation


Presented:08/21/2023
Price:€69.66
Cap:$15.52B
Current Price:€58.72
Cap:$13.08B

Presented

Date08/21/2023
Price€69.66
Market Cap$15.52B
Ent Value$22.77B
P/E Ratio21.02x
Book Value€67.34
Div Yield2.15%
Shares O/S200.01M
Ave Daily Vol332,272
Short IntN/A

Current

Price€58.72
Market Cap$13.08B
Continental AG operates as a holding company, which engages in the manufacture and sale of soft rubber products, rubberized fabrics, and solid tires. It operates through the following segments: Automotive, Tires, ContiTech, and Contract Manufacturing. The Automotive segment comprises technologies for passive safety, brake, chassis, as well as motion and motion control systems. The Tires segment focuses on the provision of tire technology solutions. The ContiTech segment specializes in the development and manufacture of cross-material, as well as products and systems for the automotive industry. The Contract Manufacturing segment is involved in the contract manufacturing of products. The company was founded on October 8, 1871 and is headquartered in Hanover, Germany.

Publicly traded companies mentioned herein: Continental AG (CON GR), Denso Corp (6902 JP)

Highlights

The presenter is long shares of Continental AG (CON GR), a German industrial conglomerate that has been controlled by the Schaeffler family since 2008. CON primarily consists of two segments: one of the best tire businesses in the world (36% of 2022 revenues) and an automotive business (46% of 2022 revenues) that provides technologies for vehicle interiors and communication. EBIT margins in the automotive business have turned negative in recent years, subsidized by the tire business, but have started to recover. This recovery should accelerate in 2H’23, and the presenter is excited about this opportunity given the recent news that a breakup is imminent. He thinks the separation will shine a light on the tire business’s stable margins and the automotive business’s margin expansion story, resulting in two independent entities that are more compelling than CON today. At €70 per share, the stock trades at 9x consensus 2023 EPS of €7.63, and he sees upside to €150 per share based on a 10x earnings multiple and €15 EPS if the margin story plays out.

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Idea Discussion

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