Citi sees a buying opportunity in Volkswagen as 'consensus is too low'

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Citi sees a buying opportunity in Volkswagen as 'consensus is too low'
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Citi Research reiterated a Buy rating on Volkswagen (ETR: VOWG_p ) (VW), maintaining a EUR146.00 price target and opening up a 30-day catalyst watch on the German automaker after the company reported stronger than expected 4Q sales volumes.

Volkswagen exceeded expectations in its Q4 2023 sales, reaching a milestone of 2.5 million quarterly sales. Analysts at Citi believe that this strong performance will positively impact the company's full-year 2023 revenues, EBIT margins, and free cash flow.

The sales boost and inventory sell-down contribute to the improvement in Q4 2023 EBIT margins, rebounding from the earlier reported 6.2% margin.

Analysts at Citi are optimistic about the outlook for VW Group's EBIT in the fiscal year 2024.

“We think that the outlook for FY24 VW Group EBIT remains better than consensus,” wrote analysts at Citi in a note.

The consensus estimate has been revised down from €25 billion adjusted EBIT to €21 billion in FY24E. Under current conditions, VW volumes are expected to rise by 3%, aligning with Citi's global sales growth forecast of 2.7%.

Positive effects from ICE vehicle pricing in FY23 are expected to continue into FY24. Additionally, the introduction of new models like Tiguan, Touareg, and Passat, coupled with cost reductions from restructuring and lower raw materials costs (offsetting higher labor costs), are anticipated to contribute to the positive performance.

Citi believes that the consensus estimate for FY24 is underestimated and anticipates an increase in shares as EPS and technical indicators improve.

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