General Motors Company

GM Details

General Motors Company (NYSE: GM) manufactures and sells trucks, cars, crossovers, and automobile parts globally. The company delivers automotive financing services via General Motors Financial Company, Inc.

Result Performance for the First Quarter Ended 31 March 2022 – (Q1FY22)

• The revenue stood at $35,979 million, contributed by automotive revenue of $32,824 million and GM Finance revenue of $3,155 million in Q1FY22.
• The net income attributable to stockholders stood at $2,939 million, EBIT-adjusted at $4,044 million, and net income margin at 8.2% in Q1FY22.
• EBIT-adjusted margins for the North America region stood at 10.7% in Q1FY22, on track to deliver FY22 guidance of 10%. Significant customer demand has continued into April 2022, with most vehicles turning as they arrived at dealers.
• The EBIT-adjusted margin stood at 11.2%, EPS-diluted at $1.35 and EPS-diluted-adjusted at $2.09 in Q1FY22.

Source: Company Reports, Analysis by Kalkine Group

Key Update

• As per the release dated 24 May 2022, Geotab and GM plan to offer connected vehicles offering to Government in the U.S.
• On 10 May 2022, the company stated that GM and Red Hat joined hands to trailblaze the outlook of software-defined vehicles.
• On 4 May 2022, the company advised that GM and INRIX joined on SaaS-based road safety solutions.
• 28 April 2022, the company announced the “2021 Sustainability Report,” which advised that it is prioritizing equitable climate action to ensure its all-electric future is inclusive of current and future expectations. The company launched a $50 million fund to fill the gaps in the transition to EVs.

Outlook

The company anticipates revenue to be $275-$315 billion, ~50% CAGR on software and new businesses, and 4-6% CAGR from auto business by 2030. Further, it projects expanding margins to 12-14% by 2030, driven by the rise in auto margin due to the increase in EVs scale and decline in battery costs and new businesses to contribute margins over 20%.

Guidance for FY22: EPS-diluted is projected to be $5.76-$6.76, and EPS-diluted-adjusted between $6.50 -$7.50. Further, the FY22 net income is between $9.6-$11.2 billion, and EBIT-adjusted between $13.0-$15.0 billion.

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 Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation, and the target price so arrived reflects a rise of low double-digit (in % terms). Accordingly, a slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the rising demand for EV vehicles and improved economies of scale.

Considering the rising demand for vehicles, along with strong organic growth and decent outlook, we give a “Buy” recommendation on the stock at the closing market price of $35.21 per share, down 2.19% as of 24 May 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

General Motors Company (GM) is a part of Kalkine’s Global Fully Charged Product

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:-

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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.