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1. Company Snapshot

1.a. Company Description

Mercedes-Benz Group AG operates as an automotive company in Germany and internationally.The company develops, manufactures, and sells passenger cars comprising premium and luxury vehicles of the Mercedes-Benz brand, including the Mercedes-AMG, G-Class, Mercedes-Maybach, and Mercedes-EQ brands, as well as small cars under the smart brand; ecosystem of Mercedes-Benz under the Mercedes me brand; and vans under the Mercedes-Benz and Freightliner brands, as well as related spare parts and accessories.It also provides financing and leasing packages for end-customers and dealers; automotive insurance brokerage and banking services; car subscription and car rental, and fleet management, as well as digital services for charging and payment; and mobility services.


The company was formerly known as Daimler AG and changed its name to Mercedes-Benz Group AG in February 2022.Mercedes-Benz Group AG was founded in 1886 and is headquartered in Stuttgart, Germany.

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1.b. Last Insights on MBG

Mercedes-Benz Group AG's recent performance has been positively driven by several factors. The company's decision to restart its share buyback program, committing to repurchase shares worth up to 2 billion euros ($2.3 billion) over the coming 12 months, has boosted investor confidence. Additionally, Mercedes-Benz reported stronger-than-expected margins at its core autos business, driven by improved sales of premium models, with a 10% increase in top-end models. The company's free cash flow was approximately $1.6 billion, also supporting the resumption of its share buyback program. Despite challenges in China and the impact of US tariffs, Mercedes-Benz's return on sales at its car division was 4.8% in the third quarter, ahead of analyst expectations.

1.c. Company Highlights

2. Mercedes-Benz Q2 Earnings: Solid Performance Amidst Tariff Headwinds

Mercedes-Benz delivered a mixed financial performance in Q2, with revenue and ASP affected by the competitive market environment. The EBIT margin was 5.1%, with a mid-3-digit million euro tariff impact. Adjusted for tariffs, the return on sales was 6.6%. The reported EPS was 0.973, missing estimates of 1.5. The NLP efficiency program contributed EUR 800 million to the improvement in the quarter. Free cash flow was EUR 1.4 billion, with a slight headwind from working capital due to higher inventories.

Publication Date: Aug -02

📋 Highlights
  • Q2 Financial Performance: Mercedes-Benz achieved a solid financial performance with an EBIT margin of 5.1% for cars and 10.4% for vans, despite tariff impacts of mid-3-digit million euros.
  • Product Offensive: The company is launching over 25 new models in the next three years, with the CLA receiving a positive market response and a full van lineup replacement planned.
  • Adjusted Returns: Adjusted return on sales for cars was 6.6%, supported by EUR 800 million from the NLP efficiency program.
  • Full-Year Guidance: The company expects a return on sales of 4-6%, with free cash flow expected to cover dividends and a cash conversion rate of 0.8-1.
  • Future Investments: Investments in 2025 will slightly exceed 2024 levels, peaking before decreasing in 2026, with a focus on electric architecture and autonomous driving.

Segment Performance

The car segment saw revenue and ASP affected by the competitive market environment, while the van division delivered a healthy EBIT margin of 10.4%. The cash flow from vans was EUR 227 million, with a headwind from inventory. The net investments in PPE and intangibles exceeded depreciation, in line with guidance.

Outlook and Guidance

Mercedes-Benz expects car sales in 2025 to be significantly below 2024, mainly due to China. The global TEV share is expected to be between 14% and 15%, with an EV share between 20% and 22%. The return on sales adjusted for cars is expected to be around 7% in H1, with H2 comparable to H1. The full-year underlying margin is expected to be within the initial guidance range of 6% to 8% pre-tariff, now in the lower half of the band.

Tariff Impact and Mitigation

The tariff impact is expected to be around 150 basis points for the full year, with a mid-3-digit million euro impact in Q2, similar to Q3, and higher in Q4. Harald Wilhelm mentioned that mitigation measures will be taken, but no further details are available. As Ola Kallenius stated, "The response to the new CLA has been extremely positive," indicating a strong product lineup.

Valuation and Metrics

With a P/E Ratio of 5.31, P/B Ratio of 0.5, and EV/EBITDA of 6.51, the stock appears to be undervalued. The Dividend Yield is 8.76%, and the Free Cash Flow Yield is 27.94%. The ROE is 9.71%, and the ROIC is 3.48%. Analysts estimate next year's revenue growth at 1.3%. The current valuation metrics suggest that the stock is priced low, potentially due to the tariff headwinds and competitive market environment.

3. NewsRoom

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Financial Services Roundup: Market Talk

Dec -04

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European Automakers Shares Climb After Trump Commits to Relax Fuel-Economy Rules

Dec -04

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Financial Services Roundup: Market Talk

Dec -04

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Auto & Transport Roundup: Market Talk

Dec -03

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Aeva shares soar after deal with European automaker

Dec -03

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RESPECTED PRIVATE COLLECTIONS LEAD EARLY HIGHLIGHTS FOR BROAD ARROW’S 2026 AMELIA AUCTION

Dec -02

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Benefits claimants cut off from BMWs and Mercedes in Motability scheme

Nov -24

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Exploring Mercedes-Benz (XTRA:MBG) Valuation After Recent Share Price Gains

Nov -23

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.00%)

6. Segments

Mercedes-Benz Cars

Expected Growth: 5.5%

The segment is expected to grow faster than the global average due to the increasing demand for luxury electric vehicles and the company's strong brand presence. The growth will be driven by new model launches and expanding market share in emerging markets.

Mercedes-Benz Mobility

Expected Growth: 6.2%

The segment is expected to grow rapidly as the demand for mobility services increases, driven by changing consumer preferences and urbanization. The company's strong brand and expanding service offerings will drive growth in this segment.

Mercedes-Benz Vans

Expected Growth: 4.8%

The segment is expected to grow in line with the global economy, driven by the demand for logistics and e-commerce. However, the growth will be slightly lower than the global average due to intense competition in the commercial vehicle market.

Reconciliation

Expected Growth: 0.0%

As a reconciliation segment, no growth is expected, as it only serves to adjust and eliminate items for consolidation purposes.

7. Detailed Products

Passenger Cars

Mercedes-Benz passenger cars are designed for personal transportation, offering a range of models from compact sedans to luxury SUVs.

Commercial Vehicles

Mercedes-Benz commercial vehicles include trucks, buses, and vans designed for cargo and passenger transportation, construction, and emergency services.

Buses and Coaches

Mercedes-Benz buses and coaches are designed for public transportation, offering a range of models for urban and intercity transportation.

Vans

Mercedes-Benz vans are designed for cargo and passenger transportation, offering a range of models for commercial and private use.

Trucks

Mercedes-Benz trucks are designed for heavy-duty cargo transportation, offering a range of models for long-haul and construction applications.

Financial Services

Mercedes-Benz Financial Services offers financing and leasing solutions for individuals and businesses.

Mobility Services

Mercedes-Benz mobility services include car-sharing, ride-hailing, and bike-sharing solutions for urban mobility.

8. Mercedes-Benz Group AG's Porter Forces

Forces Ranking

Threat Of Substitutes

Mercedes-Benz Group AG faces moderate threat from substitutes, as customers have limited alternatives for luxury vehicles. However, the rise of electric vehicles and changing consumer preferences may increase the threat of substitutes in the future.

Bargaining Power Of Customers

Mercedes-Benz Group AG has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's strong brand reputation and premium products limit customers' ability to negotiate prices.

Bargaining Power Of Suppliers

Mercedes-Benz Group AG has a large supplier base, which reduces the bargaining power of individual suppliers. However, the company's dependence on a few critical suppliers for key components may increase the bargaining power of these suppliers.

Threat Of New Entrants

The automotive industry has high barriers to entry, including significant capital requirements, regulatory hurdles, and the need for extensive distribution networks. These barriers limit the threat of new entrants to Mercedes-Benz Group AG.

Intensity Of Rivalry

The automotive industry is highly competitive, with several established players competing for market share. Mercedes-Benz Group AG faces intense rivalry from competitors such as BMW, Audi, and Tesla, which may lead to pricing pressures and increased marketing expenses.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 53.81%
Debt Cost 3.95%
Equity Weight 46.19%
Equity Cost 10.20%
WACC 6.84%
Leverage 116.51%

11. Quality Control: Mercedes-Benz Group AG passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Value: 9.1

Growth: 5.6

Quality: 2.5

Yield: 8.8

Momentum: 6.5

Volatility: 5.7

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A-Score: 6.3/10

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Yield: 10.0

Momentum: 5.0

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Mercedes-Benz

A-Score: 6.3/10

Value: 8.9

Growth: 4.9

Quality: 3.3

Yield: 10.0

Momentum: 3.5

Volatility: 7.3

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Quality: 4.7

Yield: 8.8

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A-Score: 4.2/10

Value: 0.7

Growth: 7.7

Quality: 7.2

Yield: 1.2

Momentum: 3.5

Volatility: 4.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

61.07$

Current Price

61.07$

Potential

-0.00%

Expected Cash-Flows