EQUITY RESEARCH: VOLKSWAGEN AG

The objective of this report is to study and provide an investment recommendation for Volkswagen Group. This report is based on public information available until 29th of September 2023 and it follows the format and guidance suggested by the CFA Institute. Volkswagen Group is a German company focused in the development of vehicles, engines and vehicle software, and the production and sale of passenger cars, light commercial vehicles, trucks, buses, and motorcycles, as well as in activities that comprise dealer and customer financing, vehicle leasing, direct banking and insurance activities, fleet management and mobility services. The motivation to evaluate Volkswagen Group came from my particular interest in the automotive industry and in the company, which has been asserting itself as one of the world´s leading automobile manufacturers and the largest carmaker in Europe. Volkswagen Group´s valuation was calculated using a Weighted Average Cost of Capital (WACC) method through Free Cash Flow to the Firm (FCFF) and Free Cash Flow to Equity (FCFE), complemented with the Dividend Discount Model (DDM) and a Relative Valuation through multiples. The recommendation of this report is to buy the common share, with a price target of €152.48 per share, in the end of 2023, representing an upside potencial of 22.28% when compared to the price of the common share at the time of this report´s elaboration. This recommendation is based on a medium level of risk, as the company operates in a cyclical industry, with challenging macroeconomic conditions, although maintaining a high market share and stable margins with increasing profits.