General Motors Company

GM Details

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

Key Positives:

Increase in Current Ratio (1.11x in Q1FY22 vs 1.08x in Q1FY21), Increase in Quick Ratio (0.93x in Q1FY22 vs 0.92x in Q1FY21)

Key Negatives: 

Drop in Gross Margin (13.1% in Q1FY22 vs 15.6% in Q1FY21), Increase in Cash Cycle (68.2 Days in Q1FY22 vs 65.2 Days in Q1FY21)

Key Risks:

Competitive Risk, Supply Chain Risk, Inflation Risk, Investment Risk, Macro Risk

Result Performance for the period Q1FY22

• The company reported revenues of $35,979 million in Q1FY22, compared to revenues of $32,474 million in the prior corresponding period. The sales were driven by an improvement in production numbers and decent customer demand in North America.
• Automotive operating cash flow stood at $1,635 million during the quarter, compared to cash outflow of $1,096 million in Q1FY21.
• Net income attributable to the shareholders reflected at $2,939 million during Q1FY22, with a margin performance of 8.2%.

Source: Company Reports, Analysis by Kalkine Group

Key Update

• As per as an update on 04 May 2022, General Motors and INRIX Inc. announced a collaboration to develop safety solutions to help transportation and planning agencies achieve road safety goals.
• On 28 April 2022, the company’s subsidiary, GM Defense has been selected as a winner of the 2022 Manufacturing Leadership Award in the Operational Excellence category, by The National Association of Manufacturers' (NAM) Manufacturing Leadership Council.

Outlook

The company expects FY22 net income to be in the range of $9.6 billion to $11.2 billion. It has also reaffirmed its earnings guidance of adjusted EBIT in a range of $13.0 billion-$15.0 billion.

Key Risks

The global shortage of semiconductor chips is a primary risk to the Group and coupled with inflationary pressure and a hike in interest rates can impact the margin performance.

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 price has delivered a 6-month return of ~-32.48%. In addition, the stock is trading lower than the average of the 52-week high price of $67.21 and the 52-week low price of $37.25.

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 current market price of $38.98 per share, as on 9.31 am New York Time, USA (GMT-4) as of 09 May 2022.

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

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.

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.