Neutral Outlook for Daimler Truck: Can Revised Targets Sustain Growth Amid Industry Headwinds?

Daimler Truck's recent financial results and strategic updates highlight a company navigating a complex landscape of regulatory shifts, regional market volatility, and the costly transition to zero-emission vehicles. While revised targets for profitability and growth signal ambition, the path to sustained mid-term success hinges on executing cost discipline, accelerating EV adoption, and weathering near-term industry headwinds. Here's an analysis of the opportunities and risks investors should consider.

Revised Targets: Aiming for Resilience Amid Uncertainty

Daimler Truck's updated 2030 targets—a ROS of over 12%, 50% higher free cash flow, and 3-5% annual organic revenue growth—reflect a strategic pivot toward profitability over volume growth. The company's focus on high-margin segments like defense, zero-emission trucks, and services (already generating €8 billion in annual revenue) underscores a shift toward sustainability.

However, achieving these targets requires overcoming significant hurdles. Near-term challenges include:
- North American market softness: A 20% sales drop in Q2 2025 due to cyclical freight declines and regulatory uncertainty around EPA emissions rules.
- EV infrastructure delays: Hydrogen truck adoption in Europe has been pushed to the early 2030s, delaying revenue from this segment.
- Cost pressures: While the Cost Down Europe program aims to save €1 billion by 2030, labor cuts and operational restructurings risk short-term disruptions.

Valuation: Discounted Multiples vs. Peer Performance

Daimler Truck's valuation multiples currently suggest a conservative market outlook. As of July 2025, its EV/EBITDA of 9.0x and P/E of 10.7x trail peers like Ashok Leyland (EV/EBITDA of 21.1x), reflecting skepticism about near-term margin expansion and geographic volatility.

Key comparisons:
| Metric | Daimler Truck | Ashok Leyland |
|----------------------|---------------------|---------------------|
| EV/Revenue (LTM) | 0.9x | 2.7x |
| EV/EBITDA (LTM) | 9.0x | 21.1x |
| P/E Ratio (NTM) | 10.7x | 20.4x |

Daimler's lower multiples partly reflect its reliance on volatile regions like North America and Europe, whereas Ashok benefits from stronger Asian demand and higher margins. Yet, Daimler's free cash flow margin of 6% and €2 billion share buyback program could narrow this gap over time by boosting EPS.

Growth Catalysts: Electrification and Geographic Diversification

Daimler's 90% surge in BEV sales in Q2 2025 (to 1,232 units) and partnerships like the $2.8 billion U.S. Gigafactory with CATL position it to capitalize on the EV transition. The EU's 2035 combustion engine ban and California's zero-emission mandates create long-term demand stability.

Asia's rebound (13% sales growth in Q2) also signals potential. The merger of China and India operations into the Mercedes-Benz Trucks division has improved efficiency, and India's export growth could add incremental revenue.

Risks: Near-Term Volatility and Execution Hurdles

1. North American uncertainty: The region's sales could remain weak until freight cycles normalize, and the expiration of the U.S. EV tax credit could hurt demand.
2. Regulatory costs: Compliance with zero-emission mandates requires significant capital, squeezing margins unless offset by pricing power.
3. Hydrogen delays: Postponing hydrogen truck launches to the early 2030s risks losing market share to rivals like Volvo and Tesla.

Investment Outlook: Neutral with Long-Term Upside

Daimler Truck's stock currently trades at a 42% discount to its DCF-derived fair value of €64.64 per share, suggesting a potential undervaluation. However, near-term risks—including North American sales weakness and margin pressures—support a neutral rating.

Buy signal triggers:
- Margin expansion: ROS in North America held steady at 14.4% in Q2, but Europe's Cost Down program must deliver without disrupting operations.
- EV adoption acceleration: If BEV sales surpass 25,000 units in Europe by 2030, Daimler could outperform peers.
- Share buyback impact: The €2 billion buyback, starting late 2025, could lift EPS by ~5% over two years.

Sell signal triggers:
- Further North American sales declines or delays in Asia's growth trajectory.
- Failure to meet 2026 ROS targets, signaling structural underperformance.

Conclusion: A Wait-and-See Stance

Daimler Truck's revised targets and strategic moves position it to thrive in the long term, but investors should tread cautiously in the near term. The stock's valuation offers a margin of safety, but execution on cost savings, EV scale-up, and geographic rebalancing will determine whether the neutral outlook turns bullish. For now, a “hold” rating makes sense, with a tilt toward accumulation on dips below €35.

Final recommendation: Hold with a 12–18-month horizon, prioritizing margin and FCF improvements.