D'Ieteren: A Fortress of Resilience and Growth in a Volatile World

In a world rife with geopolitical tensions, inflationary pressures, and shifting consumer behaviors, few companies exemplify the power of diversified operational resilience like D'Ieteren. This Belgian multinational has built a portfolio that blends stable cash-generating divisions with high-growth segments, positioning it to navigate macroeconomic uncertainty while delivering mid-single-digit EBIT growth through 2028. Q1 2024 results underscore this strategy’s effectiveness, validating margin expansion trends and reinforcing D’Ieteren’s status as a defensive yet growth-oriented play for investors.

The Portfolio Advantage: Cash Cows and Catalysts

D’Ieteren’s success hinges on its balanced portfolio:

1. Belron (automotive glass repair): A cash cow generating 21.2% EBIT margins in H1 2024, despite headwinds in North America. Its Eurozone dominance and ADAS recalibration services (a $3B+ global market) provide steady cash flows.
2. D’Ieteren Automotive (Belgian car retail): A market-share winner with a 23.4% net share in a shrinking Belgian market. Its Q1 sales grew 4.1% YoY, leveraging pricing power and operational efficiency.
3. PHE (premium industrial distribution): A high-growth engine with 6.4% Q1 sales growth, fueled by market share gains in HVAC and medical equipment. Its 9.3% EBIT margins are sticky, even amid inflation.
4. Moleskine (luxury lifestyle): A turnaround story with H2 2024 recovery expected. Once stabilized, its 7.7% Q1 sales decline (due to U.S. e-commerce disruptions) should reverse, unlocking hidden value.

Q1 2024: Validation of Margin Resilience

The first quarter of 2024 confirmed D’Ieteren’s ability to leverage operational discipline across its divisions:

• Belron’s EBIT margin rose to 21.2% (up from 20.5% in H1 2023), driven by Eurozone pricing and cost efficiencies, despite North American volume declines.
• TVH’s margin surged to 16.8% after a 2023 cyberattack, showcasing its recovery and cost controls.
• PHE maintained 9.3% margins through disciplined pricing and share gains, offsetting inflation.
• D’Ieteren Automotive’s 5.5% margin marked a record for the division, reflecting Belgian market resilience.

These trends align with the Group’s 2025 margin targets, with Belron aiming for 23% and TVH stabilizing near 16%.

Cash Flow: The Engine of Value Creation

D’Ieteren’s cash flow machine is its secret weapon:

• Free cash flow hit €740.6M in 2024, up 22% YoY, driven by Belron, Automotive, and PHE.
• Dividend discipline is intact: A €3.75/share ordinary dividend was proposed for 2024 (plus an extraordinary €74/share in December 2024), funded by a robust net cash position. By March 2025, half of its €500M bridge loan was repaid, reducing gross debt to €750M.
• Capital allocation is laser-focused: Debt reduction and shareholder returns take priority, with only 30% of free cash flow retained for reinvestment.

This strategy ensures low leverage (net debt/EBITDA of 0.7x) and resilience against macro headwinds like recession or currency volatility.

Risks? Yes. But They’re Manageable

• Geopolitical risks: Belron’s Eurozone exposure and PHE’s industrial ties could face demand shocks, but both divisions have proven their pricing power in past downturns.
• Moleskine’s execution: Its recovery hinges on resolving e-commerce issues. Yet its Q1 sales decline narrowed to 0.7% (excluding platform impacts), suggesting stabilization.
• Belron’s debt: While its leverage rose to €10B, Moody’s upgraded its rating to Ba1 in April 2024, citing strong cash flows and disciplined management.

The Investment Case: Defensive Growth at a Discount

D’Ieteren’s P/E of 12x and dividend yield of 4.2% reflect undervaluation relative to its peers. With 9.6% YoY EBIT growth in 2024 and a 2028 target of mid-single digits, the stock offers:
- Upside from margin expansion: Belron’s 23% target alone could add €200M+ to EBIT.
- Debt reduction tailwinds: Lower leverage improves credit flexibility and dividend capacity.
- Moleskine’s turnaround: Even a modest 5% sales growth in 2025 could unlock €100M+ in shareholder value.

Conclusion: A Rare Blend of Safety and Growth

D’Ieteren is a paradigm of portfolio diversification, combining recession-resistant cash flows with high-growth levers. Its Q1 results and free cash flow dominance validate its ability to thrive in any macro environment. For investors seeking defensive equity exposure with growth legs, D’Ieteren’s stock is a compelling buy at current levels. Act now—this fortress of resilience won’t stay undervalued for long.

Disclaimer: Past performance is not indicative of future results. Investors should conduct their own due diligence.