Advertising. The new screens for cars are futuristic and large. The displays developed by Continental can extend over the entire dashboard and are about five times larger than the ones we are familiar with. However, it will be some time before we see the so-called pillar-to-pillar displays in vehicles. Because this requires large high-tech production facilities. Apparently, the entire business with new display solutions at Continental is going well: According to its own statements, the automotive supplier has already received orders worth more than seven billion euros with a series start after 2022. A ray of hope in the currently difficult times.
The group, which makes tires, auto parts and industrial products, is struggling with problems on many fronts. Continental recently admitted that it had supplied the auto industry with contaminated air conditioning parts for years and manipulated test results. This is not well received by either customers or investors. In addition, the group posted losses in the second quarter because, in addition to high value adjustments, the increased costs for raw materials, energy, logistics, etc. weighed on the result. Continental’s management described the development as a “hurricane-force” headwind.
For the year as a whole, however, the company management is confident and expects sales of between 38.3 and 40.1 billion euros, after 33.8 billion euros last year. The adjusted operating return (EBIT margin) should be between 4.7 and 5.7 percent, in 2021 it was 5.6 percent. However, the net profit is likely to be significantly lower than last year. The analysts at Kepler Cheuvreux expect net profit to almost halve to 674 million euros (previous year: 1298 million euros). Earnings per share would thus fall from EUR 6.49 to EUR 3.37. According to the analysts, however, things should pick up again in the following years and profitability should increase. Then Continental should be able to iron out the temporary weakness of the current fiscal year.
The high level of uncertainty about future developments is also reflected in the share price and the increased volatility of the stock. In particular, the high expected range of fluctuation, known in technical jargon as implied volatility, leads to very attractive conditions for structured paper such as reverse convertibles. Therefore, both courageous investors who are looking for return opportunities and share buyers can consider these securities as an alternative to a direct investment. Reverse Convertibles offer a fixed coupon and also come with a generous risk buffer that can allow entry at a lower share price.
9.50 percent pa fixed interest rate and 30 percent bullet buffer after one year
the DekaBank 9.50% Continental reverse convertible 12/2023 (WKN DK07VY) pays a fixed interest rate of 9.50% pa based on the nominal amount (EUR 1,000.00) on the due date after one year. In order for the repayment to take place at the nominal amount, the Continental share must close at least at or above the base price (70.00 percent of the starting value) on the valuation day (November 30, 2023).
Otherwise, there is a risk of repayment losses, since Continental shares that have fallen in value are transferred to the investor at 70.00 percent of the starting value instead of the nominal value. In addition, like any debt security, the reverse convertible is subject to the issuer risk overall. Accordingly, in the event of DekaBank’s insolvency, there would be a risk of losses up to and including the total loss of the nominal amount invested.
The subscription runs from 11/07/2022 to 12/02/2022, subject to extension or shortening.
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Disclaimer: The information contained herein does not constitute a recommendation to buy or sell the financial instrument and cannot replace individual advice. This advertising information does not contain all relevant information about this financial instrument. Before making an investment decision in certificates, potential investors are recommended to read the securities prospectus in order to fully understand the potential risks and opportunities of the investment decision. The approval of the prospectus by the competent authority should not be construed as an endorsement of the securities being offered. The securities prospectus and any supplements can be found at https://www.deka.de/deka-gruppe/wertpapierprospekte under the tab “EPIHS-II-22”, the Final Terms below https://mmscache.deka.de/DE000DK07VY9_FT.pdf be downloaded. All securities information and the current basic information sheet are also available free of charge from your Sparkasse or DekaBank Deutsche Girozentrale (www.deka.de), 60625 Frankfurt. You are about to purchase a product that is not simple and can be difficult to understand.
If rates/prices are mentioned, they are non-binding and do not serve as an indication of tradable rates/prices. The values given here serve to explain the payout profile of this financial instrument. The values are not a reliable indicator of future performance.
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Hussam Masri is in charge of the expansion and development of the strategically important “Private Banking and Wealth Management” division and in this function he is responsible for the Private Banking Sales, Wealth Management, Private Banking Sales Strategy, product specialists and the certificates business and product marketing units for the Deka Group responsible.