Traton owns and operates four brands. Scania, the jewel in the crown, is the biggest in terms of sales (38% of the total) and profitability. It's also the only one that exports vehicles to every continent. MAN (32%) is not present in North America, and also produces light vehicles in addition to trucks. Navistar (24%) focuses on the North American market and also sells buses under the IC Bus brand. Finally, Volkswagen Truck & Bus (5%) serves markets in Latin America, Africa and Asia. The remainder of revenues come from financial services.

Traton's 4 brands (source: Traton)

The company has the advantage of four strong brands with an established reputation in the sector. Last year, they accounted for a record 338,000 units sold. To meet this demand, production facilities are functional and geographically optimized, with a presence in 12 countries through 33 production and assembly sites.

Geographical location of plants (source: Traton)

Today, however, the situation is more complicated. Margins have improved significantly in previous years, but the potential catalysts to continue this good momentum are now harder to find. MAN, for example, has already made considerable progress in optimizing its cost structure. Competition is becoming increasingly fierce, and customers are very demanding as progress is made in improving truck efficiency. Nor should we forget that the economy is slowing down, particularly in Europe, and this is beginning to have an impact on the order book. In the first quarter, new orders fell by 3% year-on-year and 12% quarter-on-quarter.

Pessimism should not be taken to extremes, quite the contrary. Scania boasts a double-digit adjusted operating margin, making it one of the best-performing brands in the sector. On the other hand, despite its fine rise since the start of the year, the group suffers from a low free float, with Volkswagen holding almost 90% of the capital. This situation is set to change, as the German giant aims to reduce its stake to 75% in the medium term. In addition to the financial gains that Volkswagen will derive from this operation, Traton's shares will become more attractive to investors, since a higher free float will increase the share's liquidity and could provide access to certain indices such as the MDAX.

What's more, according to analysts' estimates, the normalization phase should last just one year. By 2025, analysts anticipate an upturn - albeit modest - in order intake, and thus a return to growth. Scania's solidity, MAN's continued operational gains and Navistar's rise to prominence, which looks set to reap the rewards of its new fuel-efficient powertrain offering, should enable the Group to limit the market-related downturn.

As for the financial statements themselves, they are rather good. Traton's operating margin is lower than that of its competitors, but the company intends to capitalize on the above-mentioned levers to pursue growth in this metric over the coming years. Paccar stands out from the crowd, with margins higher than those of its competitors and the highest valuation on the market (PER of 13 times for this year). Finally, Daimler Truck and AB Volvo - which generates around 20% of its revenues from construction equipment, its most profitable division - are better valued.

To sum up, Traton is a good compromise: on the one hand, the investment is a bet that after a mediocre 2024 financial year, growth will return, and on the other hand, lovers of solid dividends will be satisfied via a yield which, at the current price, exceeds 5%.

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