Continental (CONG.DE): Model Update

Research evidence excerpt

Continental (CONG.DE): Model Update

Continental (CONG.DE)

02 July 2026 Citi Research

Continental

Valuation

We reach our target price using a blend of an assumed SOTP valuation of EUR78 and a 10-year DCF valuation of EUR83, which

results in a EUR80 target price (rounded). Our SOTP valuation of EUR78 assumes 9x EV/EBIT for ContiTech in-line with

industrial valuations and accounting for margin upside on end-market recovery and self-actions coming through in-line with

CMD targets, and Tires at 8.5x EV/EBIT in-line with typical Tier-1 through-cycle valuation ranges. Our DCF valuation assumes

a 1%/0.5% mid-term/terminal sales growth and 13.0% mid-term /12.5% terminal EBIT margin. We use a WACC of ~8% (risk-

free rate of 4.0%, ERP of 4.5%).

Risks

Downside risks to achieving our target price include the following: i) lower-than-expected ContiTech sale proceeds, ii) market

share losses in the US and Europe from any continued consumer trade-down dynamics in tyres, iii) weaker OE volumes could

drive fixed cost absorption issues, iv) further EUR strength could weigh on near-term EBIT margin upside, v) weaker industrial

demand could delay any ContiTech sale, vi) slower FCF generation could limit the deleveraging potential of the business in

2026-2027, and vii) tariffs could rise further and may not be fully compensated through pricing.

Upside risks to achieving our target price include the following: Re-rating post spin and more agile/cost efficient structure of

both entities could take shares above our assumes SOTP range. Volume upside risk: Better-than-expected volume recovery in

tires/ContiTech and better pricing dynamics present an upside risk to our base case. FX risk: favorable currency moves could

present upside risk to our estimates and investment thesis.