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Renault is determined to address its negative valuation in the upcoming year through two specialized businesses, Ampere and Horse, and an alliance with Nissan and Mitsubishi. Investors are currently attributing a value of less than zero to Renault's core business.
According to Reuters, the carmaker sold over two million vehicles last year and reported record profits in the first half of 2023.
With a market capitalization of approximately 10.6 billion euros ($11.43 billion), Renault lags behind its European rivals, such as Stellantis and Volkswagen, which boast valuations of around 64 billion euros and 57 billion euros, respectively.
Challenges Facing Renault's Market Position
Yahoo reported that Renault's struggles can be attributed to what experts call "conglomerate syndrome," where the total value falls short of the individual parts. Moreover, the company's 12-month forward price-earnings ratio, a critical factor in determining share value, is the lowest among European automakers at just 2.8.
To provide clarity and demonstrate the substance underpinning Renault's operations, CEO Luca de Meo has made it his mission to ensure that investors and the market understand the company's actual value.
Under de Meo's leadership, Renault is exploring the potential listing of Ampere, an electric vehicle and software-focused entity that is anticipated to undergo an initial public offering next spring, pending favorable market conditions. This move is expected to bolster Renault's overall value. While de Meo initially hinted at a possible valuation of up to 10 billion euros for Ampere, various analysts have since estimated its worth to range between 3 billion and 4 billion euros.
Horse, the Legacy Combustion Engine Business
Renault's legacy combustion engine business, Horse, jointly owned with China's Geely, also offers value-enhancement prospects. Currently, the business is awaiting investment from Saudi Aramco. Sources close to the matter have revealed that the Saudi oil giant plans to acquire a stake of approximately 20% in this joint venture.
The size of the investment and the stake will undoubtedly impact Horse's valuation, which CEO de Meo believes may be announced by the end of this year or early 2024.
Despite a year-to-date increase of 16% in its stock price, Renault's valuation remains surprisingly low. Analysts at Bernstein recently highlighted this disparity, underscoring the need to rectify the situation and maximize the company's inherent value within the market.
Photo: Renault Group Newsroom
