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On Wednesday, Citi analysts issued a downgrade for Forvia SE (FRVIA:FP) stock, changing its rating from Buy to Sell and adjusting the price target to EUR7.50, a decrease from the previous target of EUR12.80. The revision comes as the automotive supplier grapples with a balance sheet that requires repair. Citi analysts have pointed out that Forvia is aiming to reach a net debt to EBITDA ratio of 1.8 by the end of the year, primarily through free cash flow (FCF) generation and significant asset disposals.
The analysts expressed concerns over several risks that could impact Forvia’s deleveraging process. These include uncertainties in global light vehicle production (LVP), potential effects of tariff changes, the valuation of assets up for disposal, and the continued environment of high interest rates. The market capitalization of Forvia, which stands at approximately €1.7 billion, is now notably lower than its net debt of €6.6 billion.
While there is potential for upside through a debt/equity swap over time, Citi analysts remain cautious. They suggest that the risks of a rights issue, which could be dilutive to current shareholders, outweigh the potential benefits in the year 2025. This assessment paints a cautious picture for Forvia’s short-term prospects in the eyes of Citi analysts.
The downgrade is a significant shift in outlook for Forvia, reflecting a more bearish stance on the company’s ability to manage its debt levels amidst the current economic challenges. Forvia’s stock will likely continue to be influenced by its financial strategies and the broader automotive market conditions as the year progresses.
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