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BMW Attractively Valued Despite Chip Shortage, Coronavirus, and Higher Spending on Electrification

especially in powertrains. BMW continues to outperform the overall car market despite global economic uncertainties from the coronavirus and is one of only a handful of automakers to which we assign an economic moat. As emerging-market consumers become wealthier, many will purchase luxury items for the first time.

BMW has consistently produced vehicles that command superior pricing and generated revenue increases above global vehicle growth rates. From 2004 to 2019, worldwide light-vehicle sales grew at a 2.7% average annualized rate. During the same 15-year period, BMW consolidated revenue and automobile unit volume grew at annual averages of 6.0% and 5.3%, respectively. BMW also has long-term goals to generate automotive segment return on capital employed of equal to or greater than 40% and an automotive segment EBIT margin of 8%-10%.

Financial Strength

BMW enjoys solid financial health with flexible balance sheet. The company has averaged 14.8% industrial EBITDA margins (including China JV equity income and excluding financial services) for the past 15 years, generating solid cash flow and enabling moderate dividend payments to shareholders. With the financial services group accounted for on an equity basis, balance sheet leverage has been overly conservative with an average total debt/total capital ratio of 6.2% during the past 10 years.Also excluding financial services, manufacturing operations’ total adjusted debt/EBITDAR averages a very low 0.6 times.

BMW’s liquidity position as extremely robust, with the manufacturing operations’ cash and marketable securities balance of EUR 9.5 billion and syndicated credit line availability of EUR 8 billion at the end of March 2020. BMW’s credit line expires in July 2024. BMW’s consolidated total debt/total capital ratio, including financial services has averaged 63.2% over the past 10 years.

Bulls Say’s

  • BMW possesses sustainable competitive advantages, given the strength and global recognition of the brands, technological leadership in powertrains, and ability to command premium pricing from consumers that regularly rate its vehicles as some of the best toown, resulting in excess returns.
  • BMW’s presence in global markets reduces reliance on any one regional economy and improves growth prospects as developing markets offset mature regions.
  • The BMW, Mini, and Rolls-Royce brand images command a premium among consumers in all parts of the world.

Company Profile 

In addition to being one of the world’s leading premium light-vehicle manufacturers, BMW Group produces BMW motorcycles and provides financial services. Premium light-vehicle brands include BMW, Mini, and ultraluxury brand Rolls-Royce. Operations include 31 production facilities in 15 countries, with a sales network reaching over 140 countries. In 2020, worldwide sales volume exceeded 2.3 million automobiles and more than 179,000 motorcycles.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.