STELLANTIS / STELLANTIS US : CMD - What to Expect? Some brief thoughts

Research evidence excerpt

STELLANTIS / STELLANTIS US : CMD - What to Expect? Some brief thoughts

management on the Q1 earnings call for sequential margin improvement through the year appears very

challenging given; 1) the substantial raw material headwind (c.1% of revs implying c.EUR1.5bn, not yet being felt); 2)

limited operating leverage being achieved on incremental volumes; 3) Q1 benefitted from a non-recurring IEEPA rebate.

Key Strategic Discussions:

- Cashflow generation and balance sheet repair: Ultimately a return to positive cashflow generation is the biggest

question/issue overhanging the STLA investment case, and all the strategic points laid out below are likely to be

enforced to accelerate this. Following the c.EUR22bn write-downs, EUR6bn cash charges and dividend suspension

(here), investors remain concerned regarding the capital structure and cash discipline is front of mind. BNPP view:

STLA are likely to point towards lower fixed cost intensity and partnerships to reduce capital intensity and improve

profitability as well as reduced battery investment and tighter ROI hurdles by brand to improving FCF generation.

Even if this is the case, we expect investors to take a “show us and we will believe it” approach, and many (us

included) remain sceptical of STLA’s target to return to positive FCF generation in 2027.

- Partnerships to be more embedded within the strategy: Filosa has publicly said that partnerships will become

a core pillar of Stellantis’ future model (here), which is a notable break from the more internally focused approach

under Tavares. BNPP view: The CMD could act as a platform for a formal unveiling of more strategic partnerships,

Chinese technology tie ups, shared procurement or manufacturing and more asset light development models. In