Continental: Management Presents Case for Revenue Growth and Expanding Margins to Investors

Narrow-moat-rated Continental held an investor day in which management presented its strategy for the ContiTech, tires, and auto business segments. The firm’s midterm (3-5 years) targets include annual revenue growth that exceeds the percent change in global light vehicle production by 3-5 percentage points, revenue of EUR 51 billion-EUR 56 billion, and 8%-11% adjusted EBIT margin. 2023 guidance was confirmed with revenue at EUR 41 billion-EUR 43 billion and 5.5%-6.5% adjusted EBIT margin. We model 2023 revenue at the midpoint of management guidance on new business backlog but the low end of margin guidance due to uncertainties like supply chain disruption and inflationary cost pressures. We raised our fair value estimate EUR 1 to EUR 163, due to the time value of money. The 5-star-rated shares of Continental currently trade at a compelling 57% discount to our new fair value.