02 May 2019 by jbchevrel
VW (Volkswagen) 5y CDS tightened -2 and curve was unchanged vs iTraxx Main +2, in this reasonably risk-off session. It is also important to note that this came in the context of weak auto sales in most markets (VW deliveries in Q1-19 down -3% YoY). This is after VW reported Q1-19 revenues of €60B, +3.1% YoY and above consensus €58B. EBIT (adjusted for -€1B special item arising from legal risks) increased +15.2% YoY to €5B, above consensus €4B. Most brand beat consensus on EBIT margin: VW brand 4.3% vs 4.2%, Audi 8.0% vs 7.4%, Skoda 8.3% vs 7.7%, Scania 11.0% vs 10.8%. Only Porsche missed on that, but margin is still reasonably very high @ 15.7% vs 16.0%. Automotive net liquidity optically dropped to €16B from €24B as of end of Q1-18. €5B jump (down) was due to the first-time application of IFRS16. Despite outflow, FCF was better than expected at €2B. VW has expo to China, but it is managing the slowdown there better than peers, increasing its market share. Going forward, FY-2019 guidance was confirmed (i.e. rev +5% EBIT margin 6.5-7.5%). As far as higher frequency data, April US Light Vehicle sales showed VW +8.7% regaining momentum, vs premium segments lagging (Audi -21.4% Porsche -9.9%). That data is just US and quite volatile. In RV, this beat was the occasion for that BBB+s/A3s/BBB+s credit to tighten back to peers (on 5y CDS: 11.5bp vs F 6bp vs RENAUL & GM 3.5bp vs BMW 2.5bp vs DAIGR). RV outperformance was more vs HY name TTMTIN, where -20% YoY Tata Motors sales helped taking CDS wider +31bp on day.