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Original-Research: Landi Renzo S.

p.A. - von GBC AG

Einstufung von GBC AG zu Landi Renzo S.p.A.

Unternehmen: Landi Renzo S.p.A.

ISIN: IT0004210289

Anlass der Studie: Research study (Anno)

Empfehlung: Buy

Kursziel: 0.70 EUR

Letzte Ratingänderung:

Analyst: Marcel Goldmann, Cosmin Filker

FY 2023 will be a transition year; revenue development strong; earnings

development weak; unfavourable revenue mix weights; from 2025 onwards clear

winner of green energy transition; GBC estimates and price target adjusted;

BUY rating confirmed

Business development FY 2022

Based on the published business figures for the past financial year 2022,

the Landi Renzo Group continued its dynamic growth in the past financial

period despite difficult macroeconomic factors (high inflation on the

procurement and energy markets, etc.) and challenging general conditions

(Ukraine war, supply chain problems, etc.). Compared to the same period of

the previous year, Group turnover increased significantly by 26.6% to EUR

306.30 million (previous year: EUR 241.99 million). On a comparable basis

(full-year consolidation of SAFE & CEC & Metatron), a significant increase

in turnover of 10.1% was also achieved.

(Organic) growth effects in both business segments - Green Transportation

and Clean Tech Solutions - contributed significantly to the dynamic

increase in Group turnover. The main growth drivers were the infrastructure

business (Clean Tech Solutions business) and the European automotive

supplier business (OEM business in the passenger car sector) of the Green

Transportation division.

The Group's revenues were primarily generated by the core business area of

Green Transportation. In this business unit, revenues grew significantly by

16.7% to EUR 201.73 million (previous year: EUR 172.91 million), mainly due to

volume effects in connection with business activities with OEM customers.

Landi Renzo benefited in particular from strong OEM customer demand due to

increased sales of LPG cars within the EU.

The Clean Tech Solutions business field was able to increase its segment

revenues even more strongly with a 51.4% increase to EUR 104.57 million

(previous year: EUR 69.08 million). The significant increase in revenues was

mainly based on expanded business activities in the field of biogas and

hydrogen applications.

In contrast to the dynamic development of Group turnover, Landi Renzo had

to accept a significant decline in their operating result (EBITDA) of 12.5%

to EUR 11.04 million (previous year: EUR 12.62 million) in fiscal year 2022

compared to the previous year due to high pressure on margins (high

inflation on the procurement markets, high energy costs, etc.) and price

adjustments that only took effect after a time lag. Consequently, the

EBITDA margin also fell significantly to 3.6% (previous year: 5.2%)

compared to the same period last year.

Adjusted for special costs and one-off costs (e.g. M&A costs), the adjusted

EBITDA (Adj. EBITDA) for the past financial year amounted to EUR 15.26

million, which was a moderate increase of 4.4% compared to the previous

year (PY: EUR 14.61 million). The adjusted EBITDA margin was 5.0% (previous

year: 6.0%).

The adjusted EBITDA of EUR 9.27 million (previous year: EUR 7.21 million) was

generated by the Green Transportation segment and EUR 5.99 million (previous

year: EUR 7.41 million) by the Clean Tech Solutions segment. Both segments

thus contributed to the Group result in a similar way to their share of

Group turnover. In terms of operating profitability, the adjusted EBITDA

margin of 5.0% was relatively robust compared to the margin level of the

previous year (PY: 6.0%).

At the after-tax level, however, this technology company recorded a

negative consolidated result (after minorities) of EUR -14.28 million and

thus had to accept a significant decline compared to the same period of the

previous year (PY: EUR -1.02 million). However, it should be taken into

account that the previous year's result for 2021 was strongly influenced by

a consolidation gain (EUR 8.8 million) from a fair value valuation of SAFE &

CEC.

Overall, this technology company achieved the published turnover guidance,

but fell short of their earnings guidance (improvement in earnings compared

to the previous year). Our turnover forecast (turnover of EUR 287.74 million)

was clearly exceeded, whereas our earnings forecast (EBITDA of EUR 16.77

million) was not achieved.

Business development of Q1 2023

According to the published business figures for the first three months of

the current financial year, the Landi Renzo Group continued on its growth

path in the opening quarter with a 6.4% increase in turnover compared to

the same period last year to EUR 71.17 million.

The Clean Tech Solutions business field proved to be the main growth driver

in the first quarter, increasing its segment revenue significantly by 12.1%

to EUR 23.11 million (Q1 2022: EUR 20.62 million). This division was again able

to benefit from the increased demand for compression solutions for

biomethane, hydrogen and natural gas.

The Green Transportation business unit was also able to further expand its

segment revenue with a moderate 3.8% increase in revenue to EUR 48.05 million

(Q1 2022: EUR 46.30 million). The growth of the core business was driven in

particular by a recovery in the European core markets. In addition, a

gradual recovery of the M & HD market (especially the Chinese market) also

drove segment growth.

On the operating result level, contrary to the growth achieved, the

adjusted EBITDA (Adj. EBITDA) turned negative at EUR -0.96 million (Q1 2022:

EUR 2.67 million) due to a less favourable revenue mix (lower revenue share

of high-margin after-market business) and higher costs on the procurement

side.

Taking into account depreciation, financing and tax effects, a negative

consolidated net result (after minorities) of EUR -9.91 million was achieved

at the end of the first three months of the current financial year (Q1

2022: EUR -3.15 million).

Business development of HY1 2023

Landi Renzo S.p.A. published its half-year figures for the current

financial year 2023 on 11 September 2023. According to these figures, the

technology group continued its growth course in the first six months

despite a challenging environment (high inflation, Ukraine conflict,

aftermath of the COVID-19 pandemic, etc.), which had a negative impact on

the company's performance. Nevertheless, Group revenues increased

significantly by 5.1% to EUR 151.81 million (HY1 2022: EUR 144.45 million)

compared to the same period of the previous year.

The Group's revenues were mainly generated by the core business area 'Green

Transportation'. In this business unit, segment revenue increased by 11.1%

to EUR 104.30 million (HY1 2022: EUR 93.85 million) due to significant volume

increases in the OEM business.

OEM segment revenue amounted to EUR 65.9 million in the first half of the

year, representing a 33.9% increase in revenue compared to the same period

last year (HY1 2022: EUR 49.2 million). Responsible for this dynamic growth

was a strong increase in bi-fuel and LPG engines in the European passenger

car market and an increase in sales in China in the medium and heavy

commercial vehicle (M & HD) segment (natural gas commercial vehicle

segment).

In contrast, revenues in their after-market business, which includes orders

for conversion kits from dealers and installers in Germany and abroad,

declined by 16.1% to EUR 32.2 million (HY1 2022: EUR 32.2 million) as a result

of sales requirements in some regions (such as North Africa, Latin America

and Eastern Europe).

The Clean Tech Solutions (SAFE & CEC) business segment generated sales of EUR

47.50 million in the first six months of the current financial year, which

corresponds to a moderate decline in sales of around 6.0% compared to the

same period of the previous year (HY1 2022: EUR 50.6 million). According to

the company, the segment's revenue was negatively impacted by declining

sales volumes in methane applications, especially in the North African

market. On the other hand, in our estimation, the sales revenues generated

with biogas and hydrogen applications should have recorded significant

sales growth compared to the same period last year.

In contrast to the positive sales development, the consolidated operating

result (EBITDA) turned negative in comparison to the same period of the

previous year at EUR -0.31 million (HY1 2022: EUR 5.31 million). The decline in

earnings is mainly due to an unfavourable revenue mix in the 'Green

Transportation' segment (more OEM revenue, but less particularly

high-margin after-market revenue), which could only be partially offset by

the improved margin development in the Clean Tech Solutions segment.

Adjusted for one-off costs (e.g. M&A costs), adjusted EBITDA (Adj. EBITDA)

for the first half of 2022 amounted to EUR 3.90 million, which was below the

previous year's level (HY1 2022: EUR 6.54 million). In terms of earnings

composition, the 'Clean Tech Solutions' segment accounted for the majority

of the Group's earnings with an adjusted segment result of EUR 3.80 million

(HY1 2022: EUR 3.23 million). The 'Green Transportation' segment achieved an

adjusted EBITDA of EUR 0.20 million (HY1 2022: EUR 3.32 million).

On a net level, the technology group had to accept a negative net result

(after minority interests) of EUR -20.93 million, which was below the

previous year's result (HY1 2022: EUR -6.83 million). It should be noted that

the net result of the first half of the year was also burdened by extensive

write-offs of deferred tax assets in the amount of EUR 5.9 million.

Forecast and evaluation

With the publication of the half-year figures, Landi Renzo's management has

adjusted its previous corporate guidance (previously expected: increase in

sales and improved margin development compared to the previous year)

downwards.

Based on the results of the first half of the year and the existing order

backlog, the company expects revenue growth for the current year in the

core 'Green Transportation' segment, which should result primarily from

higher sales in the OEM segment. For the 'Clean Tech Solutions' segment,

the technology company expects revenues at the level of the previous year,

but an improvement in profitability (on an adjusted EBITDA basis) compared

to the previous year. With regard to the profitability (on an adjusted

EBITDA basis) of the 'Green Transportation' segment, Landi Renzo expects a

lower profitability compared to the previous financial year. However, a

significantly better margin development is expected for the second half of

the financial year compared to the first half.

Against the background of the earnings performance below our expectations

and the adjusted corporate outlook, we have adjusted our previous earnings

forecasts downwards. For the current financial year and the following year

2024, we now expect EBITDA of

EUR 9.58 million (previously: EUR 30.61 million) and EUR 24.76 million

(previously: EUR 38.50 million) respectively. For the following financial

year 2025, which we have included in our detailed estimate period for the

first time, we expect revenue of EUR 379.73 million and EBITDA of EUR 37.94

million.

The significant earnings growth we forecast from the 2024 financial year

onwards should be achieved through the recovery of the after-market

business and the increased expansion of the high-margin M & HD and

infrastructure business. In parallel to the expected significant

improvement in earnings, profitability should also increase significantly.

Overall, we remain convinced that the Landi Renzo Group will succeed in

benefiting from the advancing energy transition with its good market

position in both business areas. In particular, the continuing high level

of political support (US Inflation Reduction Act, REPower EU Plan, etc.) to

promote investments in renewable energies (including diversification of

energy supply) and green mobility/transportation forms and the

infrastructure required for this (hydrogen filling stations, etc.) should

further boost future business development.

Based on our lowered earnings forecasts for the financial years 2023 and

2024 and the increased cost of capital due to the rise in the risk-free

interest rate (from 1.25% to 2.00%) in our valuation model, we have lowered

our previous target price to EUR 0.70 (previously: EUR 0.98) per share. The

roll-over effect (price target related to the following FY 2024 instead of

the previous FY 2023) has counteracted an even stronger price target

reduction. With regard to the current price level, we continue to give the

Landi Renzo share a 'BUY' rating and see significant upside potential.

Die vollständige Analyse können Sie hier downloaden:

http://www.more-ir.de/d/27781.pdf

Kontakt für Rückfragen

GBC AG

Halderstrasse 27

86150 Augsburg

0821 / 241133 0

research@gbc-ag.de

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Date (time) of completion: 19/09/2023 (13:27 pm)

Date (time) of first distribution: 20/09/2023 (10:00 am)

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