General Motors Company

GM Details

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

Result Performance for the Year Ended 31 December 2021 – (FY21)

• The revenue stood at $127,004 million, contributed by automotive revenue of $113,590 million and GM Finance revenue of $13,414 million in FY21
• The net income stood at $10 billion, EBIT-adjusted at $14.3 billion, and net income margin at 7.9% in FY21.
• The EBIT-adjusted margin stood at 11.3%, EPS-diluted at $6.70 and EPS-diluted-adjusted at $7.07 in FY21. The YoY rise was mainly because of improved pricing, higher demand vehicles, and solid used car pricing in an optimal inventory environment.

Source: Company Reports, Analysis by Kalkine Group

Key Update

• On 5 April 2022, General Motors and Honda stated plans to strengthen their relationship by codeveloping a series of affordable electric vehicles using next-generation Ultium battery technology.

Outlook

The company plans to double revenue to $275-315 billion by 2030, driven by a~50% CAGR on software and new businesses and 4-6% CAGR from the strong core auto business. Further, it projects to see an expansion in margins to 12-14% by 2030, driven by auto margin expansion as EVs scale and battery costs decline and new businesses margins over 20%. In addition, the ultium is expected to play a crucial role in launching 30+ EVs globally by 2025 and ultifi to open $20-25 billion in annual software and services revenues by 2030. Also, the cruise is inviting the public to sign up for driverless rides, which is expected to generate $50 billion in annual revenue by the end of the decade.

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 price has delivered a 6-month and 1-year return of ~-31.40% and ~-36.35%, respectively. 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 $39.48.

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 $38.20 per share, as on 09:33 am New York Time, USA (GMT-4) as of 8th April 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.