da Intermonte VE Company Research Report

Buon pomeriggio,

di seguito e in allegato inviamo il company research report relativo a LUVE a cura di Intermonte.

Rimaniamo a disposizione per ulteriori informazioni.   

Un caro saluto,                                      
Diana Avendano Grassini

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Innovation and Diversification Will Support 2023 Results

• Strong quarterly results. 3Q22 product sales, announced on 13 October, came to Eu145.5mn, up 13.8% YoY and slightly better than our forecast. We had no detailed estimates on margins because this is the first time that quarterly data has been published (Lu-Ve recently joined the STAR segment). In 3Q22, adj. EBITDA was Eu19.1mn, up 2.5% YoY. EBITDA growth in the quarter is the fruit of the increase in volumes (+Eu3.8mn) which more than offset cost increases net of price rises. In the quarter, the group booked Eu4.4mn in non-cash items related to derivatives, taking net profit to Eu11.9mn, up 45.8% YoY (on restated figures net profit would have been up 18% to Eu9.7mn). In terms of the cash position, net debt as at end[1]September was Eu171.3mn, up Eu16mn in the quarter after Eu27mn of NWC absorption (24.5% on LTM sales).

• Current trading and outlook. In the press release the company said that it expects a positive 4Q22, in line with the 9M22 trend, partly in light of the order book. Looking ahead to 2023, management sees opportunities to grow sales volumes: while some market segments are slowing (supermarkets are postponing certain investments, tumble dryers reflect the slowdown in the domestic appliance business) the outlook remains very positive for heat pumps (demand is booming), datacentres and industrial cooling. In terms of pricing, Lu-Ve has already announced a 5% rise in cooling system prices as of January 2023 to factor in higher transformation costs, while automatic price adjustments (indexed to copper and aluminium) might drive average prices down but with a beneficial impact on margins. Despite a tough comparison in 1H, the Group remains well positioned for the transition to more efficient and sustainable solutions, with important trends supporting the business: 1) the enforcement of increasingly strict environmental regulations; 2) developing needs for refrigeration tools linked to rising urban populations; 3) the creation of effective cold chains in developing countries; 4) the migration of heating systems from gas to electric through the use of heat pumps; 5) cooling needs of datacentres or renewable electricity generation plants.

• Change in estimates. In light of quarterly indications, there isscope to raise our FY22 revenue forecasts by 2.2%. Our 4Q22 revenue forecast implies +0.6% YoY growth. As for 2023, we are upgrading our revenue forecast by 1.5% (now foreseen +1.0% YoY vs. +1.7%). In terms of margins, we are leaving our 2022/23 EBITDA margin forecasts unchanged, while we are assuming a higher cost of financing. All in all, we are raising EPS by 4.8% for 2022 while trimming EPS by 2.3%/2.2% for 2023/24. In terms of cash flow, we expect NWC to go from 24.5% of sales at the end of September to 17.7% at YE22 (still above the 14.4% ratio at YE21).

• OUTPERFORM confirmed; target Eu27.8 (from Eu27.2). 3Q results showed stronger-than-expected trends. Although we are maintaining quite a cautious short[1]term view to be consistent with the current macro outlook, we are still extremely confident on the company’s prospects, as it remains a major beneficiary of huge green investment programmes in the US and EU. Important tailwinds are not only its exposure to the heat pump business (expected to more than double in 2023, reaching 10% of group turnover) but also benefits linked to the onshoring of suppliers from Asia.