Company Overview: General Motors Company (NYSE: GM) manufacture and sells trucks, cars, crossovers, and automobile parts on a global scale. The company delivers automotive financing services via General Motors Financial Company, Inc. Its GM North America (GMNA) and GM International (GMI) subsidiaries caters to the automotive segment.

­­­­­­GM Details

Material Business Updates

Figure 1: Key Media Releases

Source: Company Reports, Analysis by Kalkine Group

Historical Financial Trend:

GM illustrated a recent decline in revenues amid supply chain constraints, immense competition, and semiconductor shortages; however, the topline remains to stand at elevated levels. The operating income has been since FY19, with consistent growth in margins. Operating income grew at a 1.9% CAGR (FY17 – FY21).

Figure 2: Historical Financial Overview

Source: Company Reports, Analysis by Kalkine Group

Full-Year FY20 Performance:

Figure 3: Annual Performance

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders:

The top 10 shareholders together form ~42.62% of the total shareholding. The Vanguard Group, Inc. and Capital Research Global Investors hold a maximum stake in the company at ~­­­7.07% and ~6.55%, respectively.

Figure 4: Top 10 Shareholders

Source: Analysis by Kalkine Group

Key Metrics:

The company’s strong margins and robust bottom-line highlighted the resilience of the company’s full-size pickup and SUV franchises. The firms hold reasonable liquidity to fund their EV and growth investments on Ultium strategy via the launch of GMC Hummer EV Pickup and BrightDrop EV600.

Figure 5: Key Financial Metrics

Source: Analysis by Kalkine Group

Key Investment Opportunities

Figure 6: Key Investment Opportunities

Source: Company Reports, Analysis by Kalkine Group

Outlook:

Figure 7: Guidance and Company Expectations

Source: Analysis by Kalkine Group

Key Risks:

Despite consolidated semiconductors purchase, the semiconductor shortage may present considerable challenges in automobile manufacturing. The global supply chain constraints rest active with high freight costs, increasing GM’s cost pool considering its international operations.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Stock Recommendation:

GM has delivered 3-month and 6-month returns of ~-21.359% and ~-0.410%, respectively. The stock is trading below the average of the 52-week high price of US$67.21 and the 52-week low price of US$47.07, indicating an accumulation opportunity. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company might trade at a slight premium compared to its peers’ average EV/Sales (NTM trading multiple), considering the rising demand for EV vehicles and improved economies of scale. For valuation, a few peers like Ford Motor Co (NYSE: F), Thor Industries Inc (NYSE: THO), Winnebago Industries Inc (NYSE: WGO) and others have been considered. Considering the resilient battery demand, operating cash flows at elevated levels, steady growth prospects, and potential upside as indicated by the valuation, we give a “Buy” recommendation on the stock at the closing market price of $48.60, as of 18 February 2022, down by ~0.45%.

GM Daily Technical Chart (Source: REFINITIV)

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.