da Intermonte – EL.EN. company research report

Buon pomeriggio,

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

Rimaniamo a disposizione per ulteriori informazioni.

Un caro saluto,

Ludovica Bertola

M: +39 347 1667538

Resilient Margins and Cash Flow Help Offset Turnover Decline

Turnover slowed more than expected…turnover came to €163.4mn, down 11.3% and below our €183.6mn estimate, marking a deterioration from the -7.3% posted in 1Q despite the rebound of the Aesthetic business. Indeed, while the Medical segment, as expected, posted an improving turnover trend QoQ (+1.7% in 2Q vs. -5.3% in 1Q), especially thanks to anti-aging applications, the Industrial segment slowed further, posting -27.2% vs. -10.4% in 1Q mainly due to the slowdown registered in the cutting business in China and Italy, with the latter penalised by regulatory uncertainty linked to Industry 5.0 fiscal incentives, which caused a delay in client investments.
…but margins showed greater resilience and cash generation remained robust. Despite the declining turnover, the company’s gross margin improved significantly (+2.4 pp YoY), rising from 38.2% to 40.6%, largely due to the favourable mix both in products, which are more skewed towards medical, and geographically. This led to EBIT of €19.9mn, a much more limited gap vs. our estimate (€21.1mn) than at top line, coming in just 5.7% shy of our numbers, basically half of the top line gap thanks to margins holding up much better than expected. Pre-tax profit exceeded expectations, hitting €24.1mn versus the projected €20.7mn due to a one-off gain of €5mn, tied to the lapsing of an earn-out obligation for the Chinese subsidiary. Finally, the company’s net cash position was a standout, surging to €68.7mn, far above the expected €10mn. This was driven by an improved NWC trend YoY, the sale of non-current assets for €16.3mn, and the elimination of the aforementioned earn-out obligation from liabilities (€5mn).
Italian market livelier after approval of Industry 5.0 incentives: among the messages that emerged from the call, we believe the most interesting is that following the approval of Industry 5.0 incentives, the company is finally seeing a more vibrant Italian market, with the order intake recovering. Moreover, despite the challenging Chinese environment, during 1H the company was able to halve its net loss in the country, going from €-4mn in 1H23 to €-2mn in 1H24.
Estimates: in light of 1H results and more recent trends, management has updated its guidance as it does not envisage the 2H turnover recovery being enough to enable it to exceed last year’s figure, as indicated in previous guidance, while thanks to a better mix the target for higher EBIT in 2024 than 2023 was confirmed. We are revising our estimates to incorporate a 3.4% decline in turnover in 2024 (from +3.3% previously), while EBIT is expected to reach €76mn (from €78.6mn), a €3.3mn YoY improvement.
OUTPERFORM; target kept at €13.3. We maintain a positive view on the stock. 2Q results demonstrate how the company is able to deliver encouraging results even in an adverse scenario, as it is able to react rapidly to external shocks. In our view, the long-awaited approval of Industry 5.0 incentives and the decline in interest rates should improve conditions in the company’s reference markets, helping it reverse its current earnings momentum in the near future. Our target price remains unchanged at €13.3.