da Intermonte – SERVIZI ITALIA company research report

Buon pomeriggio,

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

Rimaniamo a disposizione per ulteriori informazioni.

Un caro saluto,

Ludovica Bertola

M: +39 347 1667538

Improving Profitability, New Contract Operational Soon

• 2Q24 results confirmed improving profitability. Servizi Italia reported 2Q24 revenues of Eu73.7mn, +3.4% YoY and +1.4% above our estimates. Revenues from wash-hire services (73.8% of total sales) amounted to Eu54.4mn, +2.0% YoY, supported by a good performance from the Italian business as well as price adjustments in Turkey. Revenues from surgical instrument sterilisation (18.8% of the total) grew +4.8% YoY to Eu13.9mn. Lastly, revenues linked to textile sterilisation (7.4% of the total) were up +15.4% to Eu5.5mn. On 22 July the Italian High Court ruled on the so-called “payback” case; as a consequence, Servizi Italia released the excess portion of the payback provision, amounting to Eu0.8mn. Excluding this effect, revenues in sterilisation would have been flat YoY at Eu4.7mn while, at Group level, sales would have been up +2.3% to Eu72.9mn, still a touch better than our estimates (at Eu72.7mn). Quarterly EBITDA amounted to Eu19.9mn, +10.2% YoY and +6.3% better than expected (excluding the release of the payback provision, EBITDA would have been up +6% YoY and +2% above our estimates, with a 26.2% margin on sales). At bottom line, quarterly net profit stood at Eu1.8mn, 3x the 2Q23 figure but Eu0.9mn lower than expected, mainly because of a higher tax rate and, to a lesser extent, higher financial charges. Net debt was €127.9mn, €2.9mn higher than our estimate and €2.8mn better than in 2Q23, after higher CapEx and a lower use of factoring.
• 2024 company outlook. Management expects the elements underpinning solid 1H24 results to remain in place for the remainder of the year. In a credit market still featuring high yields, the group retains solid relationships with banks and good access to financing. As for foreign markets, the Group is closing new contracts in the Brazilian sterilisation business, while investment in new, higher-quality materials are ongoing (strengthening the productivity). The business in Turkey should show an improvement in margins. 2024 is expected to be a significant year in terms of contract renewal. A new contract in the Tuscany region started in June, while important contracts have been awarded in Lombardy and the most of them should become operative by year-end. The contract renewal cycle should be an important catalyst going forward: we note that Servizi Italia is operating contracts awarded years ago that should be renewed at better terms, with scope for upside to our current estimates.
• Change in estimates. We are raising our profitability forecasts in light of 1H24 results and continuous cost efficiencies. In detail, we are raising 2024/2025 EBIT by 12.6%/4.9% respectively. At bottom line, however, we are factoring in a higher tax rate (25% as in 1H24) and slightly higher financial charges.
• OUTPERFORM confirmed; Eu2.45 target reiterated. The results showed improving profitability, which benefits from continuous efficiencies and a normalisation in the cost of energy. These factors should continue to support the results of coming quarters as well, while newsflow on new tenders should represent a positive catalyst. The stock should benefit from its highly visible top line trend and from any reduction in the cost of capital.