Earlier in 2023 Moody’s raised its rating on French automotive group Renault SA (Renault) by one notch to Ba1 and left the outlook as stable. The upgrade occurred on the back of better-than-expected 1H23 results alongside the raising of FY23/FY24 guidance.
In the space of credit, Renault is another rising star candidate, which is based on the assumption of a broad consumer recovery. Management intends to restore dividend payment – the dividend payout ratio is expected to be around 35%.
The market expects a sustained automotive operating margin above 6%, in line with historic average levels.
The interrogation about further potential rating upgrades is dependent on the successful execution of the group’s electrification strategy. In comparative terms, Renault’s strategy is lagging behind the peer group and it appears that the company has some difficulties in making catch-up plans.
For fixed-income investors, Renault offers limited value to catch up and generally, there are better risk-reward opportunities elsewhere.