Daimler AG (ETR:DAI) logged one of the highest quarterly
earnings in its history in Q2 led by strong Mercedes-Benz sales,
which benefited from numerous model changes and new
products. Daimler's planned product launches for the rest of
the year promise to make 2011 a record-year for the company as we
expect sales to surpass the 1.9 million vehicles sold in 2010.
Daimler brands such as Mercedes-Benz, Smart, Maybach and Daimler
compete globally with the likes of BMW (GR:BMW),
), Ford (
), Honda (
) and Toyota(
) among others.
We have raised our
price estimate of $82.70 for Daimler's stock
, which is about 30% above market price. The biggest factors in our
near 30% price estimate increase came from upward revisions to
gross margin forecast.
New Mercedes-Benz Models Will Chip in
We believe that Mercedes-Benz's refreshed product line will
continue to drive demand for the brand. Over the rest of the
year, numerous new models in the C-Class segment and
continuing market success of the S-Class will drive sales.
The new-generation C-Class sedan and station wagon as well as
the new SLK roadster have helped sales since late March 2011.
Models released this summer and the remainder of the year will also
contribute to sales. The C-Class coupe will start being
delivered in June as well as those like the M-Class that will start
being delivered in September and the roadster version of the
Mercedes-Benz SLS AMG that starts deliveries in the fourth quarter.
Mercedes-Benz will also compete in the compact-car segment through
the new B-Class, which will be launched in November.
The launch of the new Sprinter will aid to the growth of
Mercedes-Benz vans in U.S. and China. Also the increased production
capacity in Argentina is likely to boost sales of vans.
China Helps Fuel Growth
In the first half of this year, Mercedes-Benz was able to grow
its sales substantially in several emerging economies, including in
China its third largest market overall due to rapid economic
expansion, increasing disposable income, new models such as the
C-class coupe (launched in May'11). Its strong brand recognition
and association with luxury has a strong influence in China.
Daimler continues to expand its presence in China. Towards
the end of Q2, Daimler agreed to invest 2 billion Euros (about $2.9
billion) along with its joint venture partner BAIC. The investment
is for setting-up a R&D center, an engine plant and facilities
for local production of several compact cars and GLK SUV in
China. This will help the brand continue its rapid growth in
Need to Watch Materials Costs
Daimler's automotive margins will remain under pressure due to
increasing commodity prices and higher material and product-related
costs. Also SG&A expenses is likely to increase to support the
new product launches at Daimler.
You can drag the trend lines in the modifiable charts above to
see the impact of these trends on Daimler's stock value.
See our full analysis for Daimler's stock