Michelin (AO) | Buy | We remain comfortable with our stance ahead of H1 earnings release

研报英文原文证据摘录

Michelin (AO) | Buy | We remain comfortable with our stance ahead of H1 earnings release

26 estimates remain unchanged, with forex suggesting potential upside and the pace of volume recovery still limited

visibility. The usual seasonality is anticipated for FCF, with only a modestly positive figure for H1.

A solid combined yield (EUR1bn+ dividend and EUR750m SBB) acts as clear support to the shares, along with a demonstrated

ability to manage periods of inflation. Management's decision to activate the balance sheet and combine higher cash returns than

historically with bolt-on deals supports higher EPS growth.

A rising proportion of cyclical activities should turn positive in the coming quarters. Pricing power in action already

Michelin shares have performed well since the mid-October warning; the stock is the best performer in the SXAP YTD after a soft 2025.

Resilient FCF generation and higher cash returns (dividend maintained, new SBB announcement) mitigated the earlier earnings reset;

replacement exposure and pricing power have been key supports vs traditional OEMs and suppliers.

While the volume recovery has been largely delayed over the last couple of years, we still anticipate it for 2026, with Q2 likely the first up

quarter in four years at Michelin. Higher cash returns and low valuation metrics offer clear reasons to wait for that rebound and signal

management confidence. Mid-size acquisitions did not prevent Michelin from announcing more cash returns for 2026.

Cyclical businesses may have lower and prolonged troughs, but they end up rebounding in the end. Comments suggest that mining and

aircraft remain solid, with infrastructure and agriculture in Europe improving. Michelin has a demonstrated ability to handle a higher

inflation environment as well.