Analysis of Porsche AG’s 2023 Results 

Porsche AG (maker of the 911) IPO’ed in September 2022 and 2023 represented its first full year as a public company.  Porsche released their 2023 results in mid March and they had what I would call a solid first year.  However, before diving into the results in more detail, I thought it might be interesting to take a look at Porsche’s IPO and current ownership structure.

 

Who Actually Owns Porsche?

Prior to Porsche AG’s IPO, its share capital was split 50/50 into non-voting preference shares and voting ordinary shares.  Volkswagen AG currently owns 75% of the preference shares and 75% minus 1 share of the ordinary shares.  Porsche SE (which is a separate entity from Porsche AG) owns 25% plus 1 share of the ordinary shares. At the IPO, 25% of the preference (non-voting) shares in Porsche AG were sold to the public.  Net net, Porsche AG’s actual float is quite small (12.5% of the share capital) and carries no voting rights.

 

With effectively 75% of both the ordinary and preference shares in Porsche AG, it would appear that Volkswagen AG is still in full control of Porsche AG.  However, that isn’t quite the case.  Ultimately, its Volkswagen’s controlling shareholder that has majority voting rights over Porsche AG.  That shareholder just happens to be Porsche SE, which is effectively the holding company for the Porsche family.  Porsche SE owns 53.3% of the ordinary shares of Volkswagen AG, which combined with its direct 25% +1 share stake in Porsche AG, gives it full voting control over the maker of the 911.  Just to make things even a bit more interesting, Porsche SE is also a publicly listed company.  Like Porsche AG, its share capital is split 50/50 into non-voting preference shares and voting ordinary shares.  100% of the ordinary shares are owned by members of the Porsche family while all the non-voting preference shares trade on the open market.  Net net, being a Porsche shareholder is similar to being a citizen of Monaco.  While you may be allowed to buy a small little piece, the ruling family is firmly in control, its interests come first, and they are really not that interested in what you might have to say.  However, there is a cost to the Porsche families complete control of Porsche SE.  When you look at the underling assets, Porsche SE should have a market cap of over €50 billion, instead its current market cap is €15 billion. 

Porsche AG’s 2023 Results

At Porsche AG’s annual press conference on March 12th, they announced 2023 results.  Overall, Porsche delivered a solid 2023 and hit key performance targets.  Porsche’s share price has been trending up slowly since the earnings were released and now sits at €93, giving Porsche AG a market cap of €42 billion.  However, the share price is still significantly below Porsche AGs 52 week high of €120 reached back in May 2023. 

 

Looking into the numbers:

 

  • 2023 Key Results: The key numbers for Porsche in 2023 were 320,221 cars sold, (up 6.3% vs 2022), Net Revenues of €40.5 billion (+7.7%), and EBITDA of €9.6 billion (+10%). Net Cash Flow was €4 billion, up €107million (vs. 2022.  Mix and pricing contributed €461 million.  Porsche intends to return €2.1 billion to its shareholders from its 2023 profits via dividends.

 

A key number here is the value (revenue) growth which is ahead of volume growth.  Porsche very much views itself as a luxury brand with a highly loyal customer base.  Being able to drive revenue growth ahead of volume growth is proof of the positioning.

 

  • Product Mix & Profitability: Porsche’s 2023 net profits were €5,2 billion up 4% vs. 2022. Mix & price were positive while increased marketing costs related to both motorsports and Porsche’ 75thanniversary were negative contributors.    While Porsche doesn’t give any indications of what models are key drivers of revenue and profitability, looking at the unit sales numbers, the 911 is still a critical driver of the business.  Porsche sold 53,741 911’s in 2023, up a massive 32%.  Macan & Panamera sales were basically flat, Cayenne sales were down 4.4% and Taycan sales grew 17.5%.  If I had to guess, the 911 is massively profitable but it was partially offset but the growth in the much less profitable Taycan.  When it comes to reporting vehicle volume numbers, Porsche has to be the most transparent manufacturer I have run across.  They provide sales to customers, deliveries to dealers, and production.  In 2023, Porsche produced 336,280 vehicles, sold 333,605 to customers, and delivered 320,221 to dealers.  Vehicles produced was up 4.7% in 2023, deliveries rose a more modest 3.3%, while sales were up 6.3%.  Like many of its competitors, the Chinese market has been a drag on sales in recent years.  In 2021, China was Porsche’s largest market and represented 32% of total vehicles delivered.  In 2023, China’s share had dropped to 25% with all the other regions (Europe, North America, Asia, Middle East & Emerging Markets) growing aggressively. 
  • CAPEX, & Debt: Porsche has very ambitious plans and is generating the cash needed to bring them to life as demonstrated by the €1,964million in 2023 CAPEX spending, up 20% vs. 2022. In the press conference, it was highlighted that Porsche is launching four new products in 2024 and that this will be the biggest refresh of its model lineup in history.  Porsche capitalizes 73% of its spending, with the balance hitting the P&L in the current year.  In total, Porsche is carrying €7.5 billion in capitalized development costs on its balance sheet.  Porsche’s debt load continues to be relatively modest and easily manageable given current Net Cash Flow.  Long term financial liabilities are €6.5 billion, up 8.6% vs. 2022 and cash and equivalents increased in 2023 by a very impressive €2.1 billion to €5.8 billion. 

 

  • Portfolio: By volume, Porsche is an SUV manufacturer and has been for quite some time. Out of the 333k cars Porsche sold in 2023, 183k (55%) were SUVs.  The iconic 911 represented only 16% of Porsche’s sales in 2023 with the remainder split between the 718/Cayman, Taycan, and Panamera.  Currently Porsche is in the middle of what is effectively a 2 year process to completely renew its model lineup.  As part of this renewal, the ICE Cayman/718 will be phased out first in Europe and then likely in the rest of the world.  A new high end EV SUV is expected in either late 2024 or early 2025.  Every Porsche in the portfolio comes with at least two drivetrain options now with the Panamera and Cayenne being offered in all three (ICE, Hybrid, EV).

 

  • Electric Cars: Porsche has pushed quite aggressively into the EV category with the Taycan described as perhaps the best driver’s EV currently produced. Porsche’s share of the EV segment currently sits at 12.8% and with the portfolio restage is well set up to grow significantly in the coming years.

 

2024 Targets

Porsche tends to set very realistic target ranges and then hit them.  In 2023, they landed in the target range on every single KPI listed.  German precision at its best.  The 2024 goals are quite modest, and I expect they will either achieve or exceed each of the KPIs again. 

 

Summary

After a very solid 2023, 2024 will be a critical year for Porsche.  If it can execute the vehicle lineup refresh flawlessly, then they are likely set up for at least the next half decade for growth.  Financially they are on very solid ground and the business continues to throw off huge amounts of cash.  While officially Porsche AG is a public company, its ownership structure allows it to operate with a longer term strategic focus and not be held hostage to short term quarterly demands.

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March 2024

 

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5 Thoughts on Analysis of Porsche AG’s 2023 Results 
    Steve Hewett
    30 Mar 2024
     1:21pm

    Excellent analysis of the accounts.👍

    Not at all surprised at their results.

    They know their cars are all sold at list, so its very easy to calculate your nett profit per vehicle, a very focused German company.

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    Neal
    30 Mar 2024
     2:45pm

    Will be interesting to see how the Macan EV rollout goes given the massive depreciation of the Taycan. It does mostly address the range issues of the Taycan, but the price point seems steep given the overall weakness in the EV market right now. Since the Macan isn’t an enthusiast product, Im expecting sales to be under MSRP in ~12 months after the initial hype wears off.

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    Larry Kwei
    30 Mar 2024
     3:16pm

    Could you provide a “decoder ring” of all the Porsche SA and AG share ticker codes? I own POAHF and POAHY, but was trying to buy into last years IPO, and I’m not sure I purchased the correct stock.

    Thanks

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    Larry Kwei
    30 Mar 2024
     3:30pm

    Would you be able to provide a “decoder ring” of the various Porsche SA and AG stocks. Tried to buy into last years IPO but not sure of which stock to follow.

    0
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