2023 net revenue is in line with our expectations
Ferretti S.p.A. announced 2023 results: Net revenue for 2023 increased 10.1% year over year to 1,134 million euros, in line with our expectations. Excluding second-hand business, net revenue increased 11.5% year over year to 1,111 billion euros, and new orders reached 1,120 billion euros (vs. 1.62 billion euros in 2022). Ongoing orders reached €1,491 billion, up 15.1% year over year, mainly driven by orders for integrated yachts (+35.9%) and custom yacht (+7.3% year over year).
Ferretti plans to release a share repurchase plan to acquire up to 10% of the total shares in the Milan and Hong Kong markets. The longest repurchase period is 12 months after the shareholders' meeting approves the plan; the repurchase price will be equal to the market price, not more than 105% of the average closing price on the five days before the repurchase. According to management, while the stock is being repurchased, it is not ruled out that potential merger and acquisition opportunities will be considered, and intentions have already been submitted to some potential targets. It is hoped that relevant information can be announced within 3 months.
Ferretti issued 2024 performance guidelines: Revenue is expected to increase 9.8-11.6% year over year, adjusted EBITDA will increase 15.2-18.2% year over year, and adjusted EBITDA profit margin will increase by 80-90 basis points.
The Group plans to pay a final dividend of 9.70 euro cents per share in 2023 (corresponding dividend payment rate of 40%).
Development trends
At the performance call: Management identified two trends that will support the company's future growth: First, thanks to improved infrastructure (e.g., connectivity), people are able to spend more time on board. Second, the younger customer base is entering the market. We believe the above trends will help create more demand for yacht purchases and upgrades, and further expand Ferretti's market space. The company has seven brands and has the advantage of a more comprehensive product portfolio and internal cross-selling compared to other non-branded shipyards and single-brand companies.
We are confident in Ferretti's high-end positioning and market leadership. We expect that even in the context of the normalization of the overall growth rate of the luxury goods industry, the company will be able to achieve further revenue and profit growth, as well as an increase in profit margins. We believe this growth will be mainly driven by customer demand resilience, capacity expansion, and continued market share consolidation.
In addition to this, Milan's dual listing and share repurchase program is expected to further improve the liquidity and valuation level of Ferretti shares.
Profit forecasting and valuation
We have kept our 2024 profit forecast largely unchanged. We introduced a 2025 revenue forecast of €1,412 million and an adjusted EBITDA forecast of €225 million. We maintain our outperforming industry rating and target price of HK$33 (corresponding 6.4 times 2024e EV/EBITDA), with 23.6% upside compared to the current share price. The current stock price corresponds to 5.6 times 2024e EV/EBITDA).
risks
Capacity bottlenecks; increased competition.