Continental
Note: This is a daily stock update and the information stands true as of 25/06/25, 09:00 CET.
Company Update:
Expert Opinion:
Our expert doesn't see any reason to be long on the name at this stage. Once Aumovio is out of the perimeter, we will assess whether there is potential on the tire business. The decision to fully allocate the debt to the tire business demonstrates that the FCF capacity of Aumovio is probably limited. Momentum is likely to remain negative for the time being. He would stay away from the name.
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Company Update:
During its Capital Markets Day (CMD), Continental issued a profit warning by revising its FY25 guidance downward. The group now expects FY25 sales of €19.5–21bn (unchanged), but adjusted EBIT margin is lowered to 10–11% (previously 10.5–11.5%).
•The Tire division now targets sales of €13.5–14.5bn with an adjusted EBIT margin of 12.5–14% (previously 13.3–14.3%).
•The ContiTech division guides for sales of €6–6.5bn (previously €6.3–6.8bn), with the adjusted EBIT margin confirmed at 6–7%.
Mid-term targets by division:
•Tire Division: Sales of €14.5–16bn, EBIT margin of 13–16% (FY24: 13.7%).
•ContiTech (ex-OESL): Sales of €5–6bn with an EBIT margin of 11–13%.
Continental expects a leverage ratio of ~2x in 2025 post-spin-off. It confirmed the planned sale of the full ContiTech division by 2026, following the disposal of the OESL business in H2 2025. Proceeds will be used for deleveraging, special dividends or share buybacks, alongside a dividend payout ratio of 40–60%.
Aumovio (Automotive Spin-Off)Will launch with a strong balance sheet, debt-free, and €1.5bn in cash—unlike most peers. Continental aims to provide Aumovio with the best possible financial starting point to enable focus on strategy execution. Despite this, we remain bearish given the structural challenges in the auto parts supplier business model. The Autonomous Mobility division stands out, particularly due to its strong potential in autonomous trucking. However, we see limited upside in the other divisions, where growth appears to be primarily driven by cost-saving measures.
•2025 guidance: €18–20bn in sales, with an EBIT margin of 2.5–4%.
•Mid-term target: €20–22bn in sales, EBIT margin of 4–6%.
•Long-term ambition: Sales above €24bn, EBIT margin of 6–8%. Dividend payout ratio of 10–30%.
Expert Opinion:
Our expert doesn't see any reason to be long on the name at this stage. Once Aumovio is out of the perimeter, we will assess whether there is potential on the tire business. The decision to fully allocate the debt to the tire business demonstrates that the FCF capacity of Aumovio is probably limited. Momentum is likely to remain negative for the time being. He would stay away from the name.
For daily updates, subscribe to our newsletter and for detailed information, reach out to us at sales@alphavalue.eu
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Alphavalue Morning Market Tip
Downgrading our EPS on weaker sales momentum - Rating cut to ADD vs BUY.
