Porsche Looking to Boost its Profits as its Prepares for a 2022 IPO That Could Value the Company as High as $81.4 Billion
Sports car manufacturer Porsche AG, which is currently a subsidiary of parent company Volkswagen AG, aims to launch an IPO later this year. But before any IPO, the iconic sports car maker wants to increase its profit margins in order to make itself more attractive to investors.
Porsche is aiming for an Ebitda margin of as much as 27% by 2026 from its automotive business. That's up from 24.5% last year, the company's CEO, Oliver Blume, said Monday during its Capital Markets Day where he discussed the automaker's IPO plans.
In 2021, Porsche reached an operating return on sales of 16 percent and is on target to reach 17 to 18 percent in 2022. Eventually Porsche is targeting a return of 20 percent as its transitions to building more electric vehicles.
Porsche's parent company Volkswagen is looking to sell a minority stake in Porsche in the fourth quarter of 2022 to help finance its own push into electric cars and unlock value.
According to Bloomberg, Porsche has already enlisted more than a dozen banks to push its planned IPO, which could value the company at 80 billion euros ($81.4 billion) and up to 90 billion euros, according to people familiar with the matter.
Porsche CFO Lutz Meschke announced that sales should grow at an average rate of seven to eight percent over the next few years. Porsche is targeting revenue of as much as 39 billion euros this year and return on sales of as much as 18%, up two points from 2021, which represents a growth of around 15%.
The company delivered 301,915 vehicles to customers worldwide in 2021, an increase of 11% compared to 2020. It was the highest number of vehicle deliveries in Porsche's history.
Porsche's most profitable model is the iconic 911 and sales of the iconic car are increasing. Sales of the 911 could reach 40,000 units in 2022, which would be a record high number for Porsche.
But Porsche is still focused on electrifying its model lineup. The automaker is targeting 80% of its model lineup to be electric by 2030 and has already found early success with its first electric model, the Taycan sedan.
The electric Taycan sedan outsold the 911 last year and the company is preparing to introduce a battery-powered version of its Macan SUV, with first deliveries expected in 2024. Porsche's new luxury electric SUV will be positioned above the Cayenne. The luxury SUV segment is generally more profitable for automakers, so it makes sense for Porsche to target this market in the near future.
"We are especially targeting higher-margin segments," said Porsche CEO Blume.
Porsche expects a higher return on electric vehicles. CFO Meschke said "In the future we will earn more with it than with cars with combustion engines." Porsche wants to increase the number of its electric vehicle offerings each year to achieve its 80% EV goal by 2030.
In addition, VW wants Porsche to gain greater autonomy in areas like software and partnerships while continuing to benefit from its relationship with its parent.
"Although we are clearly positioned in the luxury automotive segment, we benefit from significant economies of scale," Blume said in a statement. He added that Porsche is currently negotiating industrial cooperation with the VW Group.
"We are well on our way with these talks," said Blume at the Capital Markets Day event.
Although Porsche will still benefit from VW's manufacturing might, the automaker plans to have its own vehicle software. Volkswagen's software unit CARIAD is developing a software-based vehicle OS for future VW Group vehicles, but Porsche won't be using it.
However, there has been some disputes within the group about which VW Group brands will use software developed by CARIAD, which caused delays that caused it to fall behind schedule. As a result, the development plans for several Audi and Porsche models have been significantly delayed.
"We have decided to end the cooperation with CARIAD on the E 2.0 software variant," said Meschke.
The E. 2.0 version was announced in Dec 2021 and VW plans to use it by 2026. CFO Meschke says that will be too late.
"The E 2.0 is simply too late for our next models," said Meschke. However Porsche may still adopt the E 2.0 software for models produced after 2026.
Porsche also plans to develop its vehicle software independently with partners. Larger collaborations with tech companies from the U.S. and China will follow in order to meet the expectations of customers in markets outside of Germany. This includes China, which is the world's biggest auto market.
Blume said that Chinese drivers expect more tech features in their vehicles compared to European customers. Porsche wants to react to this and have software developed locally for vehicles sold in China.
The timing of Porsche's planned IPO plans are still not decided, said Blume, who is also a member of the VW Group board.
The Volkswagen supervisory board is expected to make a decision in September. After the official announcement of the IPO, an official listing date could be about four weeks later in the fourth quarter of 2022.
VW first announced the Porsche IPO plans in February.
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