da Intermonte – MONDADORI company research report

Buon pomeriggio,

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

Rimaniamo a disposizione per ulteriori informazioni.   

Un caro saluto

Laura Morreale

M: +39 3273435530

Growth in Profitability & FCF Generation Supports Positive, Long-Term View

• 4Q23 profitability well-above expectation. 4Q23 revenues came in at Eu224.8mn, stable YoY and 3% below our estimate. Trade Book revenue came to Eu106.3mn (up +1.8% YoY), slightly lower than expected, and the Education Book figure was Eu22.0mn (-6% YoY). Sales in the Retail business came to Eu66.2mn, +4.6% YoY. The Media business posted Eu39.5mn, -7% YoY (digital up +25% YoY). Adj. EBITDA was Eu22.8mn/10.1% margin (+9.6%/+0.8pp YoY), posting a 10%/+1.2pp beat on our estimates. The strong result was supported by synergies from recent acquisitions and the positive impact of savings on paper costs. Net debt excluding IFRS 16 closed at Eu86.1mn (after an ordinary cash flow of Eu68.7mn in line with our estimates but impacted by non-recurring cash-outs for ca. Eu5mn), Eu66.2mn better than the 9M23 figure. The net debt/EBITDA ratio at 1.0x was perfectly in line with company guidance. Ordinary cash flow amounted to Eu68.7mn, in line with our estimate.
• Strong 2024 guidance on EBITDA; supporting indications to 2026. In 2024, the group expects: (i) low single-digit revenue growth, also thanks to consolidation of Star Shop (as of 1st February 2024) and despite a slight decrease forecast in the book market, (ii) adjusted EBITDA up mid-single digit, sustained by cost savings and synergies; (iii) adj. EBITDA margin ~17%. For the first time, Mondadori gave mid-term outlook, which by 2026 foresees revenues at Eu1.0bn (at constant scope) and adj. EBITDA at 17%. Ordinary cash flow was indicated as not below Eu70mn annually in 2024-2026. The group announced a Eu0.12 dividend per share (50% payout ratio, dividend yield 6%) and a more generous dividend policy, which points to a minimum DPS of Eu0.16 in FY2026.
• Change in estimates. We move our 2024 EBITDA up by 3.3% to Eu158mn/16.9% margin, in line with company guidance that we consider credible, also in light of 2023 results. At bottom line, we expect net profit of Eu67mn, up 5.5%. We update our revenues forecast for 2024 (3.4% growth YoY vs. 4.3% previous) but the pace should speed up in 2025 to reach Eu993mn in 2026 (vs. management guidance of Eu1bn).
• Positioning and competitive advantage: a detailed analysis. In this report, we look in depth at the Group’s main business segment (Trade and Education Books, Retail and Media) in order to unveil its potential and better understand the strategy. The increasing focus on the core book division has driven enhanced profitability and strong cash flow generation, enabling dividend distribution and external growth, as well as lower leverage.
• Upgrade to BUY; target price Eu3.3 from Eu2.8: 2023 results and management mid-term indications confirm Mondadori is able to generate strong profitability, and sufficient cash flow to support M&A, the dividend payment, and to lower leverage. Based on our DCF model, we update the target price to Eu3.3 in light of new estimates and a lower risk-free rate (4.0% from 4.5%), and we upgrade our recommendation to BUY. The valuation is attractive, with the stock currently trading at 4.3x/4.0x EV/EBITDA 2024-’25 vs. 7.9x/7.8x book publishing peer average.