Chinese Appetite for Luxury Spur Mercedes S-Class Sales

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Daimler AG (NYSE:DAI), whose Mercedes-Benz brand enjoys a strong presence in the luxury automotive segment in China, recently reported a 56% year-on-year increase in sales in China in April. During the same period, the Mercedes luxury offering, the S-Class, registered a 111% year-on-year increase. Daimler markets its cars globally under the brands Mercedes-Benz, Smart and Maybach and competes with automakers like BMW (GR:BMW), GM ( GM ), Ford ( F ), Audi ( GR ), Honda (NYSE:HMC), Toyota (NYSE:TM) and among others.

We have a price estimate of $63.20 for Daimler, which is around 10% below the current market price.

China the largest market for S-Class

The continued growth of the Chinese economy has enabled China to emerge as the largest market for Daimler's luxury car, the S-Class. The continued popularity of the S-Class drove sales growth of 111% year-on-year in April. Daimler unveiled several new models at the Auto Shanghai indicating its commitment to the Chinese market. A wider range of product offerings will help Daimler compete effectively with new luxury car launches in China by competitors, such as BMW and Audi. China's expected growth will help Daimler capitalize on its strong presence in the luxury market and continue its rapid growth.

 

5% upside potential to stock price in our scenario

In a scenario where its global sales of Daimler's luxury vehicles - Maybach and SL vehicles - increases by 5% more than our base case estimate every year and the average price of these vehicles increases by 2% more than our base case estimates annually, Daimler's implied stock price would be $66.40, or around 5-10% upside from our current stock price estimate.

You can test this scenario and others by dragging the trend line in the interactive chart above.

See our complete analysis for Daimler AG stock is here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: F , GM , GR

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