BMW: Supply Chain Woes Result in Profit Warning; Fair Value Estimate Reduced

Narrow-moat BMW has lowered its sales and profit guidance for 2024. The outsourced Continental integrated braking systems in over 1.5 million BMW vehicles will require repairing or replacing, which will cost the company a "high three-digit million (euro) amount" for the third quarter. Demand in China also continues to be muted and increased competition in motorcycles is hitting price realization and sales volumes. While the warranty costs of the brake system recall are a one-off, the update on the Chinese market has resulted in a reduction in our 2025 growth outlook as well. We reduce our fair value estimate to EUR 154 per share from EUR 166 and to $52 per ADR from $59.