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1. Company Snapshot

1.a. Company Description

Volvo Car AB (publ.) designs, develops, manufactures, markets, assembles, and sells passenger cars in Europe, China, the United States, and internationally.The company offers sedans and SUV vehicles under the Volvo brand; and electric cars under the Volvo and Polestar brands.It also provides vehicle parts and accessories, as well as sells online.


The company was founded in 1927 and is headquartered in Gothenburg, Sweden.Volvo Car AB (publ.) is a subsidiary of Geely Sweden Holdings AB.

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1.b. Last Insights on VOLCAR

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1.c. Company Highlights

2. Volvo Cars' Q4 and FY 2024 Earnings Report: A Record Year Amidst Challenging Market Conditions

Volvo Cars delivered a strong performance in 2024, with record revenues of SEK400 billion, up from SEK373 billion in 2023. The company's gross margin also improved to 19.8% from 19.4% in 2023, driven by strategic actions and cost improvements. Core EBIT reached a record SEK27 billion, up 6% from SEK25.6 billion in 2023. The company also generated a positive cash flow of SEK1.1 billion for the year, exceeding guidance.

Publication Date: Feb -11

📋 Highlights
  • Record Revenues and EBIT: Volvo Cars reported record revenues of SEK400 billion and a record core EBIT of SEK27 billion, up from SEK25.6 billion in 2023, an increase of 6%.
  • Electrification and CO2 Footprint: Electrified cars represented 46% of total sales, with fully electric cars accounting for 23%, the highest amongst legacy premium peers. The CO2 footprint per car was lowered by 26%, up from 20% in 2023, resulting in a surplus of carbon credits.
  • Positive Cash Flow and Guidance: The company reported a positive cash flow of SEK1.1 billion for the year, exceeding guidance, and is guiding for positive free cash flow in 2025, driven by working capital, investments, and cost efficiency.
  • New Product Lineup and Technology: Volvo Cars will expand its product lineup with five new or refreshed products, including a cross-country variant of the EX30 and the fully electric ES90. The company will also introduce a new long-range PHEV for the China market and update its existing lineup with meaningful upgrades.

Electrification and Sustainability Efforts

Volvo Cars made significant progress in its electrification efforts, with electrified cars representing 46% of total sales, and fully electric cars accounting for 23%, the highest amongst legacy premium peers. The company also reduced its CO2 footprint per car by 26%, resulting in a surplus of carbon credits.

Guidance for 2025

Jim Rowan, CEO of Volvo Cars, stated that 2025 will be a challenging year due to multiple uncertainties, including a cyclical downturn in the automotive industry, geopolitical headwinds, and increased competition in China. However, the company is coming into 2025 with good momentum, having delivered two consecutive years of all-time high sales volume and improved gross margin year-over-year. Volvo Cars anticipates delivering a positive free cash flow for full-year 2025, driven by higher amortization from new models and technology.

Product Lineup and Technology

The company will expand its product lineup with five new or refreshed products, including a cross-country variant of the EX30 and the fully electric ES90, which will be one of its flagship models. Volvo Cars will also introduce a new long-range PHEV for the China market and update its existing lineup with meaningful upgrades. The ES90 will be built on the company's Superset tech stack, which enables multiple products with core compute technology.

Valuation

With a current PE ratio of 4.05 and a price-to-sales ratio of 0.16, Volvo Cars' stock appears to be reasonably valued. The company's free cash flow yield of 3.74% and ROIC of 7.21% also suggest that it is generating sufficient cash flow to support its investments and growth initiatives.

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.01%)

6. Segments

New Cars

Expected Growth: 4.77%

Volvo Car AB's 4.77% growth in new car sales is driven by increasing demand for electric and hybrid vehicles, expansion in China and the US, and a strong product lineup with refreshed models such as the XC60 and XC90. Additionally, the company's focus on safety features, sustainability, and digitalization resonates with environmentally conscious and tech-savvy consumers.

Parts and Accessories

Expected Growth: 5.4%

The 5.4% growth in Parts and Accessories from Volvo Car AB (publ.) is driven by increasing demand for premium vehicles, rising average vehicle age, and growing aftermarket sales. Additionally, Volvo's focus on electrification and autonomous driving is leading to higher demand for advanced safety features and technology-rich components, contributing to the segment's growth.

Contract Manufacturing

Expected Growth: 6.17%

Volvo Car AB's 6.17% growth in Contract Manufacturing is driven by increasing demand for electric vehicles, strategic partnerships with technology companies, and expansion into new markets. Additionally, the company's focus on outsourcing non-core manufacturing activities to specialized partners has improved efficiency and reduced costs, contributing to the segment's growth.

Used Cars

Expected Growth: 6.37%

Volvo's used car segment growth of 6.37% is driven by increasing demand for premium vehicles, expansion of certified pre-owned programs, and strategic partnerships with online marketplaces. Additionally, Volvo's focus on sustainability and safety features resonates with environmentally conscious and safety-oriented consumers, contributing to the segment's growth.

Other

Expected Growth: 4.83%

Volvo Car AB's 4.83% growth in 'Other' segment is driven by increasing demand for electrified vehicles, expansion into new markets, and strategic partnerships. Additionally, the company's focus on sustainability, safety, and innovative technology features in its luxury vehicles contribute to its growth. Furthermore, the 'Other' segment benefits from Volvo's diversified revenue streams, including subscription services and mobility solutions.

Subscription Services, Leasing and Rental

Expected Growth: 4.65%

Volvo Car AB's 4.65% growth in Subscription Services, Leasing, and Rental is driven by increasing demand for flexible mobility solutions, expansion into new markets, and a shift towards sustainable transportation. Additionally, the company's investments in digitalization and electrification of its fleet, as well as its focus on customer experience, are contributing to the growth.

Emissions Credit

Expected Growth: 10.98%

Volvo Car AB's 10.98% growth in Emissions Credit is driven by increasing demand for eco-friendly vehicles, stringent government regulations on emissions, and the company's strategic investments in electric vehicle technology. Additionally, Volvo's commitment to becoming carbon neutral by 2040 and its growing presence in the Chinese market are contributing to the segment's rapid growth.

Licenses and Royalties

Expected Growth: 10.27%

The 10.27% growth in Licenses and Royalties from Volvo Car AB (publ.) is driven by increasing demand for electric vehicles, strategic partnerships, and expansion into new markets. Additionally, Volvo's focus on innovation and technology advancements has led to higher royalty income from its patented technologies.

7. Detailed Products

Volvo XC90

A luxury SUV with advanced safety features and a spacious interior

Volvo S60

A luxury sedan with advanced safety features and a comfortable ride

Volvo V60

A luxury wagon with advanced safety features and ample cargo space

Volvo XC60

A compact luxury SUV with advanced safety features and a spacious interior

Volvo S90

A luxury sedan with advanced safety features and a comfortable ride

Volvo V90

A luxury wagon with advanced safety features and ample cargo space

Volvo XC40

A compact luxury SUV with advanced safety features and a spacious interior

Volvo Recharge

A range of plug-in hybrid and electric vehicles with sustainable energy solutions

Volvo On Call

A connected car service with remote vehicle access and emergency assistance

Volvo Car Sharing

A car-sharing service with flexible rental options and convenient booking

8. Volvo Car AB (publ.)'s Porter Forces

Forces Ranking

Threat Of Substitutes

Volvo Car AB (publ.) faces moderate threat from substitutes due to the presence of alternative modes of transportation such as public transport, cycling, and walking. However, the convenience and comfort of personal vehicles limit the impact of substitutes.

Bargaining Power Of Customers

Volvo Car AB (publ.) has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's strong brand image and loyal customer base limit the ability of customers to negotiate prices.

Bargaining Power Of Suppliers

Volvo Car AB (publ.) has a large number of suppliers, which reduces the bargaining power of individual suppliers. However, the company's dependence on a few critical suppliers for key components increases their bargaining power.

Threat Of New Entrants

The automotive industry has high barriers to entry, including significant capital requirements, regulatory hurdles, and the need for specialized expertise. These barriers limit the threat of new entrants to Volvo Car AB (publ.).

Intensity Of Rivalry

The automotive industry is highly competitive, with many established players competing for market share. Volvo Car AB (publ.) faces intense competition from other luxury car manufacturers, which increases the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 19.95%
Debt Cost 7.06%
Equity Weight 80.05%
Equity Cost 9.25%
WACC 8.81%
Leverage 24.92%

11. Quality Control: Volvo Car AB (publ.) passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Porsche

A-Score: 6.0/10

Value: 9.0

Growth: 2.6

Quality: 7.2

Yield: 6.9

Momentum: 2.5

Volatility: 7.7

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Quality: 5.6

Yield: 4.4

Momentum: 5.0

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A-Score: 5.3/10

Value: 4.6

Growth: 8.1

Quality: 4.6

Yield: 0.0

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Renault

A-Score: 4.7/10

Value: 9.5

Growth: 5.0

Quality: 2.3

Yield: 4.4

Momentum: 3.0

Volatility: 4.0

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PUMA

A-Score: 3.6/10

Value: 7.7

Growth: 6.6

Quality: 2.8

Yield: 3.1

Momentum: 0.5

Volatility: 1.0

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Volvo Car

A-Score: 3.1/10

Value: 7.3

Growth: 4.9

Quality: 3.3

Yield: 0.0

Momentum: 2.5

Volatility: 0.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

34.27$

Current Price

34.27$

Potential

-0.00%

Expected Cash-Flows