Mercedes Benz Action: German Efficiency Full Screen (OTCMKTS: DDAIF)

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We at Mare Towers have recently done extensive coverage of the automotive sector, links to our previous articles are listed at the bottom of the page. Today we return to the Mercedes Benz Group (OTCPK:DDAIF) (OTCPK: DMLRY) which recently published its first Q1 report as an independent entity, or rather separate from the Daimler Truck Group after last year’s spin-off.

In our last article, we concluded that we were optimistic in the short term thanks to the brand’s strong pricing power and its strength as a company, even in the face of industry headwinds. We were also bullish on the long term, as the company offered a cheap opportunity to play on the megatrend of BEV and self-driving compared to some other US competitors.

Q1 results

Looking at the recent post, it doesn’t read very well. Semiconductors are mentioned 5 times on the first page alone. Mercedes says global auto industry continues to be “characterized by bottlenecks in the availability of semiconductors. In addition, the effects of the war in Ukraine have recently weighed on market development, particularly in the Europe region.”

This effectively translates to fewer cars sold for Mercedes Benz, car unit sales in the first quarter were 487,000 compared to 538,900 in the first quarter of 2021, a decrease of 10%. However, this did not prevent the Group from posting higher figures on its P&L.

  • Turnover amounted to 34.8 billion euros (+6% year-on-year increase). This was due to improved net pricing and sales structure
  • EBIT amounted to 5.3 billion euros (+13% year-on-year increase). The group indicated that currency effects had a positive net impact
  • Net income was down to €3.6 billion (vs. €4.4 billion), mainly due to lower income tax charges in the same quarter of 2021 thanks to the creation of a fuel cell joint venture; and profits from discontinued operations from former Daimler Truck assets.

Short-term outlook

The group was quick to suppress any excessive optimism, however. “Due to the greater uncertainties regarding the global economy and the development of the Group’s activities, the general market risks have increased from medium to high compared to the 2021 annual report.”

Mercedes Benz cited in its report on risks and opportunities the effects of the Russian-Ukrainian war, mentioning risks related to energy supplies and the expropriation of assets from Russian subsidiaries.

The German company maintained its guidance for fiscal 2022 expecting slightly higher revenues than 2021, while maintaining the level of EBIT from the previous year, the results being drawn (no pun intended). by the car and light truck segments. In the mobility segment, Mercedes expects less activity during the year.

Another exciting piece of news regarding their mobility segment is the sale of Share Now, their fleet rental joint venture in partnership with BMW, to Stellantis. Although no figures have yet been released, media reports suggest the figure is between €100m and €250m.

Conclusion

We still maintain a long-term bullish view on Mercedes Benz, we will look at the group’s EV penetration as the year progresses. Although we are positive and maintain our buy rating, we are reducing our price target to 82 euros per share.

See more of our automotive sector coverage below

  1. Nissan: tell me the story
  2. Genuine Parts Company: love at first sight
  3. Renault: the most exposed car company in Russia
  4. Volkswagen: all about long-term trends
  5. Ferrari will race again

James R. Rhodes