Company trends
The current situation of the company
Faraday announced 3Q22 revenue: new orders rose 22% year-on-year to 401 million euros, and revenue rose 15% year-on-year to 245 million euros, driven by the Americas (up 114%) and the Asia-Pacific region (up 336%, thanks to a low base), in line with our expectations. Bespoke yachts contribute the most to revenue growth by sector (42 million euros compared to 3Q21), accounting for 42 per cent of 3Q22's total revenue.
Throughout the 3Q22 period, the company acquired two companies in its supply chain, yacht wooden furniture expert II Massillon Sal and Fratelli Canalicchio S.p.A., which specializes in yacht static appearance and automatic power systems. The group also launched the Riva El-Iseo model as its first electric yacht.
During the 9M22 period, the group's new orders rose 27% year-on-year to 1.043 billion euros. As of September 30, 2022, orders-on-hand increased by 36% to 1.38 billion euros compared with December 31, 2021.
Thanks to a skewed revenue structure towards high-margin bespoke yachts and increased operating leverage, Ferretti's adjusted EBITDA profit margin increased from 13.2 per cent of 9M21 to 14.0 per cent of 9M22, while net profit margin rose from 5.1 per cent of 9M21 to 6.3 per cent of 9M22 (profit margins are based on income excluding second-hand yachts).
Comment
We believe that thanks to the business model of Faraday Group focusing on providing scarce products to ultra-high net worth and very high net worth individuals, the company's performance resilience is more obvious under the uncertainty of the macro environment. The strategy of switching to customized yachts has begun to pay off in terms of profit margin expansion. We are also optimistic about the market feedback on the electric yacht that the group has just launched.
Profit forecast and valuation
We keep our profit forecasts for 2022 and 2023 basically unchanged. We maintain an outperform industry rating and a target price of HK $30.00, corresponding to 5.1x 2023 EV/EBITDA. The current share price corresponds to a 2023 EV/EBITDA of 2.4 times, and our target price has 53.8% upside over the current share price.
Risk.
Production bottlenecks and supply constraints; increased competition.