Conti could re-join Dax in June

Continental AG could re-join the German DAX index as early as June or September. Financial analysts also expressed support for continued growth at Conti, with Morgan Stanley summing up the firm’s expectations of the company in a single word – “confidence.” In an investor’s note dated 9 May, the bank continued by explaining its view that the latest feedback on vehicle production orders and tyre price discipline indicates that company targets “may prove conservative.”

Analysts report that Conti’s ongoing success is, to some extent helped by the “visibility” of its order book. Conti doesn’t expect any order cancellations and Morgan Stanley’s assessment is that in the short-term it appears better than expected.

Referring to an investor’s briefing in London, the bank suggested that management is confident on margin development in the tyre sector. Volumes may be “weak in developed markets” (especially when it comes to European commercial vehicle tyres), however pricing is said to remain strong.

OE business is described as “almost fully hedged” by virtue of raw material “pass-through clauses” in these contracts. And what’s more the company’s management reportedly thinks the aftermarket could accept further price increases should raw material inflate. The effects of tyre labelling are also seen as a potential upside.

Furthermore the report suggests Conti has gained market share in the first quarter of 2012 and capacity expansion plans are not expected to undermine utilisation rates as Asian, Russian and Latin American markets are still growing.