UBS still likes Renault, says share price reaction overdone
The reaction in Renault's shares on 15 January to news the French state had started a probe into possible emissions-testing fraud by the carmaker was likely overdone, analysts at UBS said.
Renault lost €2.5bn in market value as a result of the share price drop.
However, even if evidence of wrongdoing was found the tab for any such infractions and fixing costs was likely to be considerably less than that which German rival Volkswagen was facing, the broker said.
To start with, there was no indication of wrongdoing. Furthermore, the French manufacturer's annual unit sales were less than a third of Volkswagen's and the company was not facing US legal costs as it had no exposure in that geography.
"In light of the €6.5bn initially provisioned by VW for the fixing cost, and assuming fixing cost/car of €650, it would imply that all the diesel cars sold by Renault in Europe over the past 3 years were equipped by a defeat device, which seems to be an overly negative outcome," analyst David Lesne wrote in a research note sent to clients.
Hence, UBS said it continued to like Renault because of the combination of organic growth and potential for margin expansion and optionality - as regards emerging markets - that the stock offered.
Lesne stuck to his 'buy' recommendation and €110.0 share price target for the shares.