Investing.com -- Citi Research has opened a 90-day positive catalyst watch on Continental AG (ETR:CONG), citing a supportive second-quarter 2025 update and upcoming strategic milestones, including the planned Aumovio spin-off in September. The brokerage maintained a “buy” rating and a €86 target price, with shares last closing at €75.32, implying a 14.2% upside and a 17.6% total expected return including a 3.4% dividend yield. The pre-close update outlined stable performance across segments. Automotive margins were guided toward the upper end of the 2.5%–4% range, supported by cost efficiencies, favorable pricing, and limited impact from tariffs due to USMCA-compliant imports. Citi said previously signaled third-quarter softness was walked back, reducing near-term earnings risk. Tire margins were forecast toward the lower end of the 12.5%–14% range for the second quarter, with full-year guidance reaffirmed. Headwinds included foreign exchange effects, mid-double-digit raw material costs, and OE volume weakness in Europe and North America. However, positive price/mix trends of around 3.3% were expected to support recovery into the second half. ContiTech posted sequential revenue improvement, though margins remained at the low end of the 6%–7% range. Management noted “gradual signs of improvement,” and the sale process for the OESL unit remains on track for completion in 2025. Citi revised its sum-of-the-parts (SOTP) valuation of Continental to €84 per share, reflecting an updated ContiTech fair value of about €4.2 billion, up from €3.2 billion, based on improved industrial exposure and long-term EBIT margin potential of 10%. This valuation was averaged with a €88 DCF estimate to retain the €86 target. Group guidance was seen as credible and de-risked. For fiscal 2025, Continental is projected to post €38.9 billion in revenue and €2.8 billion in adjusted EBIT, with a core EPS of €8.61. Segment EBIT margins are modeled at 13.6% for Tires, 6.1% for ContiTech, and 3.6% for Automotive. The company trades at 8.7x 2025 P/E and 7.5x EV/EBIT, levels Citi considers undemanding. The brokerage expects the upcoming Aumovio spin-off and potential updates on the OESL sale to act as catalysts. It also noted that ContiTech sale proceeds, estimated around €4 billion, may be returned to shareholders via special dividends or buybacks in 2026.