Company:
Landi Renzo
Listings:
Milan Exchange & Frankfurt Exchange
Ticker:
LR.MI & ARQ.F
Market cap at time of publication:
€ 78,77 MEUR
Stock price at time of publication:
€ 0.35
Analyst target Price:
€ 0.70 EUR by GBC AG
Business:
RNG/Hydrogen mobility & OEM producer
Website:
https://landirenzo.com/
Landi Renzo is not just another automotive company; it is a torchbearer of the green revolution. With a primary focus on alternative fuel systems, particularly hydrogen, natural gas, liquid natural gas (LNG) and liquefied petroleum gas (LPG), Landi Renzo positions itself as a key player in mitigating the environmental impact of traditional combustion engines. This vision aligns seamlessly with the global push towards greener transportation. Landi Renzo is a relatively unknown profitable cleantech gem from Italy and was founded back in 1954. Today, the company has over 900 employees in 50 countries and approximately 80% sales come from revenues outside their home market in Italy. The company specializes in all components and engines related to hydrogen, LPG, natural gas, and liquefied natural gas so-called LNG. The focus of the company is the design, production, and sale of components, as well as alternative engine systems for vehicles. Customers are car manufacturers (OEMs) as well as dealers and independent aftermarket fitters. Renewable fuels are something all investors interested in ESG should keep an eye on and one should therefore specifically take a closer look at Landin Renzo as it will take more than electrification alone to achieve zero emissions, so-called Net Zero emissions on a global scale.
Landi Renzo’s strategic positioning within the automotive ecosystem is noteworthy. As governments worldwide tighten regulations on emissions, the demand for alternative fuel systems is on the rise. Landi Renzo, with its decades of experience and a comprehensive portfolio of solutions, is well-positioned to capitalize on this trend. The company’s global reach and established partnerships add an extra layer of financial resilience.
Landi Renzo’s success is not in isolation. The company’s strategic partnerships with major automotive manufacturers and collaborations with governments underline its commitment to driving sustainable change on a global scale. These partnerships not only ensure a steady flow of business but also position Landi Renzo as a leader in the race towards greener mobility.
Goldman Sachs estimates that the hydrogen supply chain market will require $5000 billion dollars to reach Net Zero globally and that the total market for hydrogen production will increase by 100% by 2030 to a sum of $250 billion USD and $1000 billion respectively by 2050. These macro trends will reward hydrogen as a fuel in all different forms of transport and thus indirectly also be very beneficial for Landi Renzo.
Goldman Sachs also estimates that hydrogen will probably reach the same price picture as diesel for heavy trucks at filling stations as early as 2027, which clearly indicates that hydrogen will be an important component in the green transition for Net Zero globally.
Why is it interesting to invest in Landi Renzo right now if the company has been around since 1954?
Almost all forms of renewable fuels are on the rise and are in a huge growth curve. Many countries are currently striving for global domestic production of renewable fuels. In order for the earth globally to be able to reach zero emissions, ie net zero, it will require large investments in electrification but also in other types of infrastructure such as hydrogen, renewable natural gas (RNG), biogas, etc. Landi Renzo is, according to ESGFIRE, the best positioned player in the market to take advantage of this growth in non-electrification renewable areas due to its history and deep know-how in the sector. More and more automakers are betting on vehicles powered by other renewable energy sources in addition to electricity. For example, Toyota and Hyundai, which are making major investments in the field. Another example is Renault in Colombia, which has replaced its entire production line with now running on natural gas. So far, only Colombia has
converted over 10,000 vehicles without any problems with current vehicle warranties. Renault says drivers save 25-35% in fuel costs thanks to the conversion.
Emerging countries that do not have an expanded functioning electricity grid will probably also become a large market for Landi Renzo in the future as it is relatively easy to rebuild existing gasoline / diesel vehicles to be able to run on Hydrogen, biogas and other renewable fuels. In China, for example, sales of vehicles that run on hydrogen via fuel cells grew by 300% in 2022. The advantages are many, for example, the range of some vehicles is 800 kilometers on a tank with fuel cells that run on hydrogen.
However, most hydrogen produced today is unfortunately not green, but the European Union in February 2023 decided that hydrogen produced with the help of nuclear power should be classified as green energy will really pave the way for vehicles that run on hydrogen in the future.
It is highly noteworthy for investors that there are likely large hidden values in a possible separate listing of the subsidiary SAFE & CEC on NASDAQ in the US. This could ,according to our calculations, add value of € 86-129 million EUR either in the form of cash or in the form of a value-added securities holding. Safe & CEC currently has revenues of around €86 million EUR annually. If we apply the same valuation as Clean Energy Fuels , which is an equivalent peer, then with an EV / Sales multiple of 3.3 we have a separate market capitalization around €285 million EUR for Safe & CEC, of which 51% of this company is currently owned by Landi Renzo. This possible separate listing individually could therefore mean a possible justified price increase of Landi Renzo of around 100% against today’s share price.
Another positive aspect to consider is the fact that many countries are working to ramp up their hydrogen infrastructure. One example of this is Germany where the government recently proposed a bill where the hydrogen grid ramp up is a core part in transition the transportation sector into a more greener and sustainable industry. According to the German government, the aim of the drafted bill is to create the legal framework for the development of a national hydrogen infrastructure “to enable a rapid and cost-effective ramp-up of the hydrogen market”. This should not only ensure security of supply in the future, “but also take significant steps towards clean, affordable and safe energy”. As this is a specialty of subsidiary SAFE & CEC these initiatives will directly positively affect the business case for Landi Renzo.
Lastly but not least important Landi Renzo recently (July 2023) appointed an extremely well merited CEO in Annalisa Stupenengo which has more than 30 year experience from the mobility sector. Annalisa has previously worked with Iveco Group, CNH Industrial and FCA. In her last roles, she was also the Chief Operations Officer (COO) at Iveco Group and Chairman of FPT Industrial where she also had held the CEO role. She has work experiences on R&D of technological innovation projects, focusing on hydrogen and biomethane applications which should prove to be very useful and helpful for Landi Renzo’s development. The company’s Chairman Stefano Landi has announced there will be a new industrial plan in 2024 with focus to ”speed up the whole Group’s growth path, in particular the Clean Tech Solutions sector, in line with the development strategy pursued over recent years. “
Financial structure / History
Thanks to a recent share rights issue of EUR 57 million, Landi Renzo is very well capitalized and there should therefore be no risk of a new share issue in the foreseeable future.
The company has recently carried out a consolidation in which it incorporated the companies Metatron (acquisition in hydrogen) and their joint venture in the US that is partly owned (51%) together with the, for ESG investors, perhaps better known company Clean Energy Fuels (listed on Nasdaq). The joint venture company SAFE & CEC is of particular interest as this subsidiary is the world leader in compressor systems for hydrogen and supplies components / infrastructure for renewable fuels such as CNG, hydrogen and RNG (renewable natural gas) globally. This is an apparent assessment as the subsidiary has cooperation with publicly listed Clean Energy Fuels Landi Renzo also has an ongoing project for a hydrogen-powered combustion engine.
Looking at the latest financial report for nine-months passed during 2023 Landi Renzo continues to grow thanks to strong OEM business however an unfavorable sales mix put some weight on profitability. Also operating margin recovery continued in Q3 of 2023.
Bear case scenario
There are several l factors which needs to be taken into account before pursuing a possible investment in Landi Renzo. The following risks are not comprehensive, and investors are recommended to do their own due diligence before any investment decision.
Should global green initiatives lose ground and the global green energy transition lose pace in the years to come this will negatively affect the business of Landi Renzo. A new industrial plan (with focus on the clean tech sector) is expected to be presented by management during 2024 to increase revenues. Should this new industrial plan fail to deliver in the years to come this could also present some downside to the stock price. Pressure in pricing and higher raw cost of raw materials could also negatively affect profit margins for Landi Renzo. An unexpected global economic turndown could also negatively affect Landi Renzo being an OEM supplier. Overall, ESGFIRE views the risks with the investment case of Landi Renzo being more related to macro factors rather than specific company risks. Since the core industry of Landi Renzo still is being an OEM supplier to the car industry we see the downside in the bear case as limited.
Conclusions and bull side investment case
Landi Renzo emerges not just as an investment opportunity but as a beacon of sustainable innovation in the automotive industry. For investors committed to ESG principles and seeking growth in the green revolution, Landi Renzo stands as an intriguing prospect, bridging the gap between returns and environmental consciousness.
Landi Renzo has many incredibly strong macro trends that suggest that the company is going to meet a bright future. For the global green transition that is currently underway, Landi Renzo’s expertise in renewable fuels will be invaluable. The company is currently valued at 12,4 X EV/EBITDA for 2024 and 7,82 X EV / EBITDA for 2025. As a comparison competitor Westport Fuel Systems is trading at a negative EV / EBITDA for 2024 and 15,6 EV / EBITDA for 2025. Landi Renzo also has solid technical expertise and is possibly also sitting on very large hidden values through its subsidiary SAFE & CEC, which only in itself through a separate listing could itself generate a share price return of around 100%. At the same time, the fall height in the current share price is relatively low thanks to the recently completed new share issue of EUR 57 million. In conclusion, Landi Renzo transcends the label of a conventional investment opportunity. It emerges as a cornerstone in the convergence of financial growth and environmental responsibility. For investors aligned with ESG principles and envisioning a future where sustainable practices drive profitability, Landi Renzo stands as a compelling choice—a journey towards not just financial gains but a greener, more sustainable tomorrow. Overall, ESGFIRE sees a very good risk/reward in the Landi Renzo investment case.
About ESGFIRE
ESGFIRE is an investment company and research firm that focuses on ESG companies with either an environmentally friendly service or product. ESGFIRE has a performance record of over 1000 % returns since 2018.
Contact details
Website: www.esgfire.com
Group CEO: Filip Erhardt
Email: Filip@esgfire.com
Telephone: +46701609605
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This post is based upon reliable sources, namely regulated press releases from the company, as referred to above. Nevertheless, this post may contain interpretations, estimates, or opinions of the authors, or other non-factual information. If that is the case, this is continuously stated above. Furthermore, any projections, forecasts, or similar are explicitly stated as such.
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