Aston Martin - Thinner - Model Update
All,
Please find our updated analysis here.
Despite its new models being well-received, Aston Martin (AML) has struggled in the last 12 months. Sales of the new GT/Sports models have fallen beneath our (and the company’s) expectations, and SUV sales have been hampered by the slowdown in China, but after some delays, the Valhalla hypercar deliveries have begun. A higher mix of Specials means we expect 2026 revenue to be up, but volumes will not recover before 2027. The cushion underneath the bonds is getting thinner, we estimate that £300m is needed vs a Market Capitalisation of around £500m.
Investment Considerations:
- We have not taken a position in AML yet, although the recent results pushed yields out to 18%, which is interesting to us. We see the brand EV as worth £2bn, with net debt of £1.5bn and a market cap just under £500m, the market agrees. The EV covers the SSNs but the cushion is getting thinner and thinner.
- We see 5 points of upside if fresh cash was raised, and 5 if an LME transaction big enough to fill that gap was completed. The muted response to an LME transaction would be similar to Synthomer, with investors happier to see the liquidity gap bridged.
- We see AML as needing £300m of cash before it can be FCF positive sustainably. The models have been well received, but volumes simply aren’t high enough. The weakness in the Chinese market is hurting the SUV models, which we believe is a significant part of the dealer inventory issues. AML will need to raise the cash by Q2 2027 (even with the Yew Tree Facility), we see £300m as being needed (around £50m more than we initially expected).
- Valhalla deliveries are now underway, but the outlook for the Core models remains challenging. We do not expect volumes to get to 6,000 until 2028.
Key Conclusions:
- As our Key Value drivers section points out, there is still £300-£400m of equity under the bonds. The company will need £300m in cash to fully fund itself, but we expect the major shareholders will continue to be supportive.
- The Trading section highlights that 2026 volumes are expected to be around the same level as 2025. We are expecting revenue and margins to improve as there will be a greater mix of higher value cars (Valhalla).
- In our driver section, our forecast is for volumes of 5,400, and Revenue of £1.6bn in 2025, rising to 6,400 and £1.7bn by FYE28.
- Long-term, we see Aston Martin being bought by Geely.
- There remain risks to the company, including the costs of electrifying its fleet, but these have been pushed back.
Trading Update:
Q1 2026:
- Operationally, the results were slightly below expectations. The bonds will be softer, but any drop will be reduced by the affirmation of 2026 guidance and the additional £50m liquidity facility provided by the Yew Tree Consortium. The £50m facility is interest-bearing (if drawn) and secured by certain company assets (no further details were given); it increases liquidity to £230m. Whilst AML hasn’t suffered any issues from the Gulf conflict yet, supply chain disruption remains a risk.
- Unit sales were in line with expectations, but Average Selling Price fell 7% to £179k. There are around 400 aged cars in dealer stock (which we suspect is dominated by DBX models in China). AML is making payments to dealers to help reduce prices and sell the vehicles. Working Capital outflows were £63m, largely due to the ramp up of DB12 S deliveries; management does not expect this to unwind significantly in the year. The US quota for vehicle imports from the UK is 25k per quarter (at 10% tariff); if the quota is filled, AML would delay deliveries, which could have a temporary impact on working capital (inventory).
- 2026 volumes are expected to be around the same level as 2025, we are expecting revenue and margins to improve as there will be a greater mix of higher value cars (Valhalla).
- We see a cash raise of £300m being necessary to reach sustainable Free Cash Flow and we expect this to happen in 2026.
I look forward to discussing this with you all
Aengus
T: +44 203 744 7055