The yacht industry is the leader, and the Asia-Pacific market has great potential for development.
Faraday is the global market leader in inboard composite materials and custom-made high-end yachts, with a market share of 13% in 2021. The market share of its 80-99 ft inboard composite yacht and 30 m to 43 m inboard customized yacht reached 20% and 24% respectively. The revenue scale of the global inboard yacht market is expected to grow at a compound annual growth rate of 7.6% from 2020 to 2025, while the subdivided inboard customized and super yacht market will grow at a compound annual growth rate of 14.1% and 12.6%, respectively. In addition, the yacht market penetration in the Asia-Pacific region is much lower than that in Europe and the United States. with the technology and channel support of Weichai Group, the controlling shareholder, we are optimistic about the group's growth potential in the Asia-Pacific market. Industry research predicts that the market size in the Asia-Pacific region will grow at a compound annual growth rate of 9.0% from 2020 to 2025, higher than the global growth rate of 7.3%, while China's implementation of a series of policies to support the development of the yacht industry will accelerate the development of the industry as a whole.
The growth rate of business accelerated in the first quarter of 22, especially the growth of custom yachts. In the first quarter of 22, new orders increased by 97.2% compared with the same period last year; net income reached 257 million euros, an increase of 37.9% over the same period last year. Among them, the net income of customized yachts with higher profit margins increased by 103.6% year-on-year to 96 million euros, accounting for 12 percentage points to 37%. The group's adjusted EBITDA reached 32 million euros, a year-on-year increase of 78.4%. The profit margin increased by 3.4% to 13%, mainly due to 1) the longer waiting list due to high cumulative orders, and the group's stronger pricing power; 2) increased market share of more profitable business segments such as customized yachts; 3) economies of scale of procurement and more efficient absorption of fixed costs. We expect EBITDA to maintain rapid growth this year due to the rapid growth in cumulative orders last year and the increase in the proportion of customized yachts with higher profit margins.
The "buy" rating was given a "buy" rating for the first time, with a target price of HK $31.73. 48.3% of rising space company revenue and profitability were affected at the initial stage of the epidemic, but growth has since returned to better than the performance before the epidemic. We are optimistic about the potential of the company's continued growth in revenue in the customized and super yacht segment in the future, and other high-margin businesses, including official boats and after-sales service, will have a positive impact on the company's overall profit margin, while the parent company Weichai Group will help it develop the Asia-Pacific market, which is dominated by mainland China, with a forecast EBITDA of 120 million / 150 million and 180 million euros respectively in 22-24. It increased by 27.4%, 22.1% and 18.6% respectively over the same period last year. The current valuation is 47.9% and 49.0% discount with overseas counterparts Sanlorenzo (SLIM) and Italian Sea Group SPA (TISG IM), respectively. We believe that the company's current valuation is undervalued. The target price of HK $31.73 is mainly based on the discounted cash flow method and the relative valuation method, which is equivalent to 8.3x / 6.4x forecast EV/EBITDA in 22 and 23 years, and covers the "buy" rating for the first time due to a potential increase of 48.3%.
Risk hints: (1) macroeconomic uncertainty; (2) the risk of delivery delays or rising costs caused by shortage of raw materials; (3) product safety risks; (4) exchange rate risks