Research Update: Mercedes-Benz Group AG Upgraded To 'A' On Continued Robust Margins And Cash Flow Expectations; Outlook Stable

Global premium carmaker Mercedes-Benz Group AG (Mercedes) reported stronger profitability and cash flow than we expected in the first quarter of 2023, and it maintains a solid orderbook. Under our revised projections, we expect that Mercedes' S&P Global Ratings-adjusted EBITDA margin will be well above 14% over 2023–2024, combined with annual free operating cash flow (FOCF) of well above €8 billion (5.5%-7.5% of sales). This will create ample headroom to absorb an impending slowdown in demand, additional input cost inflation, and potentially weaker net pricing. We therefore raised our long- and short-term issuer credit ratings on Mercedes to 'A/A-1' from 'A-/A-2'. We also raised our issue rating on Mercedes' unsecured debt to 'A' from 'A-'. The stable outlook indicates that

...- Global premium carmaker Mercedes-Benz Group AG (Mercedes) reported stronger profitability and cash flow than we expected in the first quarter of 2023, and it maintains a solid orderbook. - Under our revised projections, we expect that Mercedes' S&P Global Ratings-adjusted EBITDA margin will be well above 14% over 2023¡2024, combined with annual free operating cash flow (FOCF) of well above 8 billion (5.5%-7.5% of sales). - This will create ample headroom to absorb an impending slowdown in demand, additional input cost inflation, and potentially weaker net pricing. - We therefore raised our long- and short-term issuer credit ratings on Mercedes to 'A/A-1' from 'A-/A-2'. We also raised our issue rating on Mercedes' unsecured debt to 'A' from 'A-'. - The stable outlook indicates that we expect Mercedes to progress further with its electric vehicle (EV) strategy, and successfully manage pricing, model mix, and costs in weaker industry conditions, resulting in an adjusted EBITDA margin of...

Research Update