da Intermonte – ESPRINET Company Research Report

Buon pomeriggio,

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

Rimaniamo a disposizione per ulteriori informazioni.   

Un caro saluto,                                      
Diana Avendano Grassini

M. +39 3381313854

Attractive Value for a Key Enabler of Italy’s Digital Transition

• 3Q results preview – resumption of sales and margin growth expected: we expect sales growth of +8% YoY in 3Q to €1.05bn, marking a return to a positive growth trajectory after 4 quarters of decline in the context of an easier comparison base (3Q21 sales fell 13%YoY), supportive B2B demand and enhanced product availability. We note that at the time of its 2Q results release PRT indicated solid sales and profit growth in July and August. We expect the relative importance of Advanced Solutions to continue to increase, contributing to margin expansion, as we forecast a 3Q gross margin of 5.13% (+15bp YoY), and adj. EBITDA to grow +21% YoY to €20mn, a 1.86% margin (+20bp YoY). 3Q net income is forecast at €9mn (+34% YoY). We expect positive 3Q FCF of €47mn, partly enabled by WC (despite WC historically being a cash drag in 3Q) as we expect strong management of payables to take advantage of vendors’ indicated de-stocking efforts. 3Q net debt is therefore forecast at €210mn (from €257mn at 1H22).

• FY22 guidance and medium-term targets likely to be confirmed: we believe the strong growth forecast for 3Q, the positive mix developments expected (better growth in high[1]margin activities), along with the accretive addition of Bludis from November to help ensure confirmation of FY22 guidance (low single-digit sales growth, adj. EBITDA “>€93mn”, “high double-digit” ROCE), implying buoyant 2H growth of at least +24% YoY in adj. EBITDA. We therefore forecast robust margin growth again in 4Q, with adj. EBITDA expected up +26% with the 4Q margin forecast to widen by +35bp YoY. We also do not expect any changes to PRT’s medium-term targets to 2024 or its strategic guidelines, presented back in November 2021.

• Strategic focus on margin enhancement continues: with the CELL story now in the rear[1]view mirror, PRT’s focus returns fully to its strategic path to becoming a “full service provider”, targeting an enhanced presence in Solutions and Services, areas with superior margin profiles. On 2November PRT announced the acquisition of the Italian distributor of niche Value-Added ICT solutions Bludis, for a low EV/EBITDA multiple of 4.0x, in our view showing that the company remains capable of executing accretive M&A deals in the key segments targeted by its strategy. Bludis generated €13mn in sales and EBITDA of €2.2mn in FY21, i.e. a 17% EBITDA margin, which compares to the 3.4% recorded by PRT’s Solutions division).

• Updating our estimates: our new forecastsinclude FY22 sales growth of +2.5% and adj. EBITDA of €93mn, in line with guidance and consensus. The Bludis acquisition is included in our updated estimates for both 4Q22 and FY23-24.

• BUY reactivated, new TP €13.9: we resume coverage of PRT with a renewed positive view. We believe the equity story continues to be driven by the multiple tailwinds powering medium-term ICT demand growth in Southern Europe and the outstanding delivery on its ROCE maximisation strategy. PRT is down -59% since its August 2021peak, a sharp decline that is not reflective of steady estimates (FactSet consensus EPS for 2022/23 changed by -2%/+9% over the period). The stock is now trading at just 7.1x/5.8x P/E on 2022/23, at a c.47% discount to Swiss ICT distribution peer ALSO Holding despite the expected narrowing of the profitability gap. Our new DCF-based TP is ex-dividend (FY22E DPS expected at €0.54, flat YoY) and reflects our new estimates and a higher WACC, mainly due to a raised risk-free rate (now 4% vs 2.5% in our last report).