The company's recent situation
Ferretti S.p.A. announces 1Q23 results update: Net revenue (excluding second-hand business) increased 16% year over year to 280 million euros, an acceleration from 4Q22's 10% year-on-year increase. Adjusted EBITDA increased 27% year over year to €40 million, corresponding to an adjusted EBITDA margin of 14.3% (vs. 13.0% of 1Q22). Net profit increased 42% year over year to 19 million euros, corresponding to a net profit margin of 6.6% (5.4% of VS.1q22). By region, revenue in the Asia-Pacific region doubled (up 105% year on year), while Europe, Africa, the Middle East (up 12% year on year) and the Americas (up 14% year on year) continued to grow. The improvement in profit margins was due to the company's stronger pricing capabilities, scale effects, and the company's continued strategic shift to custom-built yachts with higher profit margins.
In 1Q23, Ferretti bought Cantiere San Vitale for 40 million euros, a 70,000-square-meter shipyard set up in Ravenna, Italy. If fully put into operation, it would be possible to increase the Group's current production capacity by about 20%. As of March 31, 2023, the Group had active orders of 1,496 million euros and net cash of 301 million euros. Ferretti management once again reiterated the group's medium- to long-term goals: to achieve endogenous growth of around 10% per year, an EBITDA profit margin higher than 18.5%, and a cash turnover ratio higher than 85%.
reviews
Management expressed optimism about the results during the conference call. Highlights of the conference include: 1) The Group plans to invest an additional 40 million euros in the newly acquired Ravenna shipyard over the next three years to expand plant space and production R&D. The group plans that the shipyard will be dedicated to Ferretti brand production and the Wally brand's own production portion, and expects full operation by mid-2024. 2) The current business performance in Turkey and the Persian Gulf is particularly outstanding. 3) Ferretti Group has observed that its customers are becoming younger. 40% of yachts sold in 2022 were cross-sold, meaning existing customers bought two or more times from Ferretti Group. 4) Management expects that switching to in-house provision of after-sales and supporting services will help improve future profit margins. 5) Currently, the Group does not have any foreseeable brand acquisition plans.
Profit forecasting and valuation
Our earnings forecasts for 2023 and 2024 remain largely unchanged. We maintained an outperforming industry rating and a target price of HK$33, corresponding to 6.0 times 2023e EV/EBITDA, based on improved profitability. The current stock price corresponds to 4.0 times 2023e EV/EBITDA. Our target price has 39% room to rise from the current stock price.
risks
Capacity is limited; competition intensifies.