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Investing.com - Michelin (EPA:ML) is positioned to expand its profit margins from 12% in 2024 to over 14%, according to a new Bernstein analysis.
The research firm has assigned an "outperform" rating to Michelin stock, citing the company’s ability to maintain market dominance despite increasing competition from Chinese manufacturers. Bernstein’s analysis indicates that Tier 1 tire companies like Michelin and Bridgestone (TYO:5108) have successfully maintained approximately 50% global market share over the past decade through premiumization strategies.
Michelin’s substantial research and development investments, totaling approximately $1 billion annually, have created significant technological barriers to entry for competitors. This R&D advantage has proven particularly valuable in the premium tire segment, where even Chinese EV manufacturer BYD continues to source primarily from Western brands despite insourcing over 70% of other components.
Bernstein also highlighted Bridgestone with an "outperform" rating, describing the company as "undergoing a technology-driven turnaround." The firm expects both companies to benefit from industry trends toward electrification and sustainability, which favor premium tire products where incumbent manufacturers hold their strongest market positions.
The analysis suggests Michelin’s margin expansion could drive a valuation rerating from the current 4x EV/EBITDA to 5x, while expressing less optimism about Continental and Pirelli similar industry tailwinds affecting those companies.
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