The fog around Porsche’s valuation may be about to clear. After interminable delays, Volkswagen could finally list its luxury marque, which may be worth 100 billion euros or more. If so, VW’s own valuation would look cheap. The overall value created, however, may depend on how much control the carmaker is prepared to give up.
The merest hint of a Porsche initial public offering has sent Volkswagen preference shares up over 6% since Tuesday. VW acquired the group in stages from 2009, after the Porsche-Piëch family botched its takeover of VW itself, but a listing has been talked about for years. The challenge has been to get the different parties to agree, including the Porsche-Piëch clan, who have a 31% stake in Volkswagen, and labour unions and the state of Lower Saxony, who have a powerful position on its board. The need to invest in green technology means VW may proceed with it, Reuters reckons.
It’s a good time to list Porsche. The marque has performed strongly recently, with revenue growing on average by 9% annually since 2018 to 30 billion euros. Valuations for luxury brands are in nosebleed territory: Ferrari, the only large listed European bling carmaker, is valued including debt at 10 times forward sales and around 40 times EBIT, according to Refinitiv data.
Porsche probably can’t expect a Ferrari-style multiple, yet. It is less profitable, converting just 16% of revenue into operating profit versus Ferrari’s 25% margin, and may initially not grow so quickly. Analysts at UBS, for example, value it at 50 billion euros. Yet even a 20 times forward EBIT multiple, a roughly 50% discount to Ferrari, could justify a 110 billion euro price tag, according to Refinitiv estimates.
That would be hard to square with VW’s own valuation. The German group’s enterprise value, when calculated without including its financial services unit’s borrowings, is 152 billion euros, implying the business ex-Porsche is worth just 40 billion euros, or less than 0.2 times forward revenue. Porsche, which will contribute just 25% of 2022 operating profit, according to Refinitiv, would make up over 70% of its value.
That rich valuation may not emerge. Investors in an IPO might apply a discount if the group retains a controlling stake, or if Porsche continues to suffer from VW’s complex governance, given that unions and politicians control the board. As such, a Porsche IPO looks a worthwhile drive, but with an uncertain destination.
