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 €
306.30 million (previous year: € 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 € 201.73 million (previous year: € 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 € 104.57 million
(previous year: € 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 € 11.04 million (previous year: € 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 € 15.26
million, which was a moderate increase of 4.4% compared to the previous
year (PY: € 14.61 million). The adjusted EBITDA margin was 5.0% (previous
year: 6.0%).

The adjusted EBITDA of € 9.27 million (previous year: € 7.21 million) was
generated by the Green Transportation segment and € 5.99 million (previous
year: € 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 € -14.28 million and
thus had to accept a significant decline compared to the same period of the
previous year (PY: € -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 (€ 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 € 287.74 million)
was clearly exceeded, whereas our earnings forecast (EBITDA of € 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 € 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 € 23.11 million (Q1 2022: € 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 € 48.05 million
(Q1 2022: € 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 € -0.96 million (Q1 2022:
€ 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 € -9.91 million was achieved
at the end of the first three months of the current financial year (Q1
2022: € -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 € 151.81 million (HY1 2022: € 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 € 104.30 million (HY1 2022: € 93.85 million) due to significant volume
increases in the OEM business.

OEM segment revenue amounted to € 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: € 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 € 32.2 million (HY1 2022: € 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 €
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: € 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 € -0.31 million (HY1 2022: € 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 € 3.90 million, which was below the
previous year’s level (HY1 2022: € 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 € 3.80 million
(HY1 2022: € 3.23 million). The ‘Green Transportation’ segment achieved an
adjusted EBITDA of € 0.20 million (HY1 2022: € 3.32 million).

On a net level, the technology group had to accept a negative net result
(after minority interests) of € -20.93 million, which was below the
previous year’s result (HY1 2022: € -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 € 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
€ 9.58 million (previously: € 30.61 million) and € 24.76 million
(previously: € 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 € 379.73 million and EBITDA of € 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 € 0.70 (previously: € 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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