Rivian Automotive, Inc. Class A - Motor Vehicles

6月28日

Key arguments in support of the idea.

• The Company’s supplies grow faster than on average in the market.
• Modernization and expansion of production lines may lead to a boom in sales in
2025.

Investment Thesis

Rivian Automotive, Inc. (RIVN) is a US company that develops, manufactures and
sells electric vehicles. The model range is presented by electric SUVs of the R
series. The Company is also developing its own line of commercial vans, EDV,
actively used by Amazon.com, Inc. for delivery in 100+ US cities. The retail giant is
also one of Rivian’s major investors.

The Company’s EV shipments grow faster than in the industry on average. In Q1,
sales of BEVs in the United States increased by only 2% y/y, while Rivian
Automotive was able to sell 71% more cars in this period than in the 1st quarter of
last year. In Q1, RIVN’s share of the US EV market rose to 5%, from 3.1% a year ago.
In April and May, EV (BEV) sales in the US were 1.5% higher than in the same period
of the prior year. We believe that over the current quarter, the automaker may
again show faster supply growth than its peers. From April 5 to May 1, the Company
suspended EV production to modernize its production processes. We expect that in
Q2, the automaker will supply about 13 thousand cars (+3% y/y). This year, the
Company plans to produce 57 thousand electric vehicles, which may increase
shipments by ~14% y/y for the whole of 2024. In the current market realities, this
forecast looks quite solid.

It seems that Rivian Automotive may indeed achieve a positive gross margin in
the last quarter of this year. The Company has upgraded its production lines at
the Illinois plant and predicts that the initiatives taken will allow it to achieve gross
profit in Q4 2024. Also in early May, the Company announced that the Illinois
Department of Commerce and Economic Opportunity would allocate funds to
help the automaker expand its existing plant. The total incentive program
amounting to $827 million will allow the Company to postpone the construction of
a new plant in Georgia and focus on the production of new R2 and R3 models at
existing facilities. Besides, on June 21, Reuters representatives visited Rivian’s plant,
and its CEO RJ Scaringe said that the Company had managed to reduce material
costs related to car production by 35% due to the modernization of production
lines. These factors suggest that Rivian may significantly increase its sales in 2025.

Based on the EV/Sales’2024 multiple, RIVN securities are valued at 1.7x, which
corresponds to the average for public Chinese and US EV manufacturers.
Nevertheless, we consider this valuation of RIVN attractive, given higher expected
sales growth and stable financial position. As of the end of Q1 2024, Rivian’s cash
balance was $7.8 billion, which is enough for the Company to continue its
expansion in the US market over the next few years.

We believe that in the short term, RIVN stock may show positive dynamics.

The target price for RIVN shares on the horizon of two months is $12.9, the
rating is Buy. A stop-loss order is recommended at $9.6