Clabo S p A : PMI Capital Research - Clabo Update Report FY2022

Strong FY2022 results, with a record high in revenues and marginality, since IPO

Sector: Producer Manufacturing

FY22 sales at Euro 51.4 m with return to profit after 3 years. In light of the market environment that has been created with the consequences of Russia-Ukraineconflict, the energy crisis and the inflationary impact on prices in almost all merchandise sectors, the highlights of FY22 for Clabo are the double digit growth in revenues and marginality, the return to profit after 3 years and, generally speaking, the promptness and effectiveness of the recovery actions implemented by management that enabled a rapid return to pre-pandemiclevels of profitability, also recording a record year in 2022 in terms of sales and margins. Getting to the point, revenues settled at Euro 51.4 m, up 16% from previous year (Euro 44.2 m) predominantly due to foreign sales exceeding 75%, particularly in non-EUareas, and the continuous R&D activity, able to develop, produce and offer customers innovative products both in design and in the use of materials and technological solutions. VoP is up from Euro 50.8 m in 2021 to Euro 59.3 m in 2022 (+17% YoY) with EBITDA reaching Euro 8.7 m (vs. Euro 6.0 m in FY21), while EBITDA margin stood at 15% vs. 12% of our projections, due principally to increased sales volumes and containment of structural costs. Except for raw materials, which have risen sharply in price for the reasons already described above, and miscellaneous operating expenses, all other items of operating costs see their incidence fall in relation to VoP, thanks to the efficiency and profitability recovery processes put in place by the management of the three companies (Clabo Spa, Qingdao Clabo Easy Best Refrigeration Equipment Co. Ltd and Howard McCray Enterprises LLC). Net income figure confirmed the growth process and totalized Euro 0.89 m, recording a significant YoY increase compared to the loss recorded in FY21 (Euro 0.9 m). Regarding the balance sheet side, net debt came in at Euro 42.4 m, strictly in line with Euro 41.4 m of previous year, and Equity stood at Euro 10.9 m (Euro 8.8 m as of 31/12/2021).

Outlook remain positive in 1Q23. A time series analysis of the Group's performance in the first quarter 2023 confirms the excellent earnings performance relative to the current year, along with exceeding the total revenues of the pre-pandemic period. Both in terms of total revenues and Ebitda, 1Q23 period represents the record quarter since the listing year (2015) with confirmed orders of Euro 17.7 m, +12% from 1Q22; Growth in the U.S. market continues in both food retail and BPG segments (Bar, Patisseries and Ice Cream), and the performance of the market in Asia in particular is highlighted by the recovery of the Chinese domestic market. Looking at the evolution of operating results over the four years under review, it can be seen that the macroeconomic phenomena described above had a significant impact on the group's performance. However, the recovery actions implemented by management have enabled a rapid return to pre-pandemic levels of revenues and profitability, recording a record year in 2022 in terms of sales, margins, and profits. The Group continues to see signs of confidence from its customers that point to a forecast for 2023 growth in revenues and margins, compared to the year just ended. Management is also confident that the production optimization processes at the Jesi and Philadelphia plants, the rationalization of the organizational structure and the re-pricing of a wide range of products carried out during 2022 will lead to further benefits in terms of profitability in the next fiscal year as well.

Estimate revision and valuation. Given the above we finetuned our revenues estimates, with the aim of confirming the growth process. We now expect sales growth of 11% in FY23 (9% previously) and 10% in the years to follow and we also increased profitability to reflect the structural improvement in margins from 2023 onward. Updating our DCF and multiple based valuation model for new estimates and up-to-date market data, we obtain a target price of Euro 4.38 p.s. (Euro 3.48 p.s. previously), providing for a potential upside of 124%. At our TP the stock would be trading at FY23-24 EV/EBITDA multiples of 9.3x and 8.3x.

Equity Research

UPDATE NOTE FY22

Euronext Growth Milan

Target Price € 4.38 (3.48 pr.)

Price (€) 1.96

Market Cap (€ m) 18.62

EV (€ m) 59.12

As of May 15th, 2023

Share Data
Market		Euronext Growth Milan
Reuters/Bloomberg	CLA.MI/CLA:IM
ISIN			IT0005091324
N. of Shares			9,524,494
Free Float				38.41%
Main Shareholder		Cla.Bo.Fin S.r.l
Financials
	2022A	2023E	2024E	2025E
Sales	51.4	57.1	62.8	69.1
YoY %	+16%	+11%	+10%	+10%
EBITDA	8.7	9.2	10.4	11.6
EBITDA %	15%	14%	15%	15%
EBIT	3.7	4.9	5.8	6.8
EBIT %	6%	8%	8%	9%
Net Income	0.9	2.0	2.8	3.6
Net Debt	40.5	37.4	36.8	31.9
Performance
		1M	3M	6M
Absolute %		-2.01	5.22	7.06
Relative (FTSE Italia G.)	1.04	11.15	9.28
52-week High/Low (Eu)	2.77	/	1.67

Research Department of

E d o ar d o F u m a g a l l i

e . f u m a g a l l i @ i r to p . co m

Monday, May 15, 2023 - 6:30 PM	1

					Equity Research
					UPDATE NOTE FY22
				Euronext Growth Milan
KEY FINANCIALS
Profit&Loss Statement	2020A	2021A	2022A	2023E	2024E	2025E
Sales	33.9	44.2	51.4	57.1	62.8	69.1
Revenues (VoP)	35.8	50.8	59.3	64.5	70.3	76.0
EBITDA	(6.5)	6.0	8.7	9.2	10.4	11.6
EBIT	(11.4)	0.9	3.7	4.9	5.8	6.8
Financial Income (charges)	(2.1)	(2.4)	(2.6)	(2.3)	(2.2)	(2.1)
Pre-tax profit (loss)	(14.7)	(1.5)	1.1	2.6	3.5	4.7
Taxes	4.5	0.6	(0.2)	(0.6)	(0.8)	(1.1)
Net profit (loss)	(10.1)	(0.9)	0.9	2.0	2.8	3.6
Balance Sheet
Net working capital (NWC)	3.8	5.8	7.6	11.5	13.7	14.6
Net fixed assets	44.9	47.5	48.4	42.9	42.9	40.5
M/L Funds	(4.0)	(3.9)	(4.6)	(4.2)	(4.1)	(4.0)
Net Capital Employed	44.7	49.3	51.4	50.2	52.4	51.1
Net Debt (Cash)	37.5	40.5	40.5	37.4	36.8	31.9
Net Equity	7.2	8.9	10.9	12.8	15.6	19.2
Cash Flow
EBIT	(11.4)	0.9	3.7	4.9	5.8	6.8
D&A	4.9	5.1	5.0	4.3	4.6	4.8
Tax	4.5	0.6	(0.2)	(0.6)	(0.8)	(1.1)
Cahnge in M/L Funds	(2.0)	(0.1)	0.7	(0.4)	(0.1)	(0.1)
Gross Cash Flow	(4.0)	6.5	9.2	8.2	9.5	10.4
Change in NWC	4.3	(4.0)	(0.5)	(2.1)	(1.5)	(1.5)
Change in other current asset	2.6	2.1	(1.3)	(1.9)	(0.7)	0.5
Operating Cash Flow	2.9	4.6	7.4	4.3	7.4	9.5
Capex	(4.9)	(7.7)	(5.8)	1.3	(4.6)	(2.5)
Acquisitions	0.0	0.0	0.0	0.0	0.0	0.0
Change in other non-current asset	(0.1)	(0.0)	0.0	0.2	0.0	0.0
Financial Income (charges)	(2.1)	(2.4)	(2.6)	(2.3)	(2.2)	(2.1)
Free Cash Flow	(4.1)	(5.5)	(1.0)	3.5	0.6	4.9
Dividend	0.0	0.0	0.0	0.0	0.0	0.0
Change in Equity	(0.9)	2.6	1.1	0.0	0.0	0.0
Change in Net debt (Cash)	(5.0)	(3.0)	0.2	3.5	0.6	4.9
Per Share Data
Current Price	€1.96
Total shares (mn)	9.5
EPS	(1.08)	(0.15)	0.05	0.10	0.14	0.19
DPS	0.00	0.00	0.00	0.00	0.00	0.00
FCF	(4.12)	(5.55)	(0.98)	3.49	0.56	4.91
Pay out ratio	0%	0%	0%	0%	0%	0%
Ratios
EBITDA margin	-18.3%	11.8%	14.7%	14.3%	14.8%	15.3%
EBIT margin	-32.0%	1.7%	6.3%	7.6%	8.2%	8.9%
Net Debt/Equity (Gearing)	523.1%	457.1%	372.2%	291.0%	235.9%	165.8%
Net Debt/EBITDA	-5.74	6.74	4.64	4.06	3.54	2.74
Interest cover EBIT	-5.58	0.36	1.44	2.09	2.59	3.30
ROE	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
ROCE	-35.7%	0.5%	7.7%	10.9%	12.5%	15.4%
Free Cash Flow Yield	-216.7%	-291.9%	-51.5%	183.8%	29.7%	258.3%
Growth Rates
Sales	-31%	30%	16%	11%	10%	10%
Revenues (VoP)	-35%	42%	17%	9%	9%	8%
EBITDA	-203%	192%	45%	5%	13%	12%
EBIT	-756%	108%	320%	31%	18%	18%

Source: Group Consolidated Data & PMI Capital Research Estimates

Monday, May 15, 2023 - 6:30 PM	2

				Equity Research
				UPDATE NOTE FY22
				Euronext Growth Milan
Revenue breakdown by segment
	2022	%	2021	%	Δ %
Bar, Patisseries and Ice-Cream	26.970	52,44%	26.937	60,89%	+0,01%
Food retail	24.459	47,56%	17.303	39,11%	+41,36%
Total sales	51.429	100%	44.240	100%	+16,25%
Source: Company Data and PMI Capital Research Elaboration
Revenue breakdown by geography
	2022	%	2021	%	Δ %
Italy	12.817	24,92%	13.794	31,18%	-7,08%
UE	8.965	17,43%	7.374	16,67%	+21,58%
Rest of the world	29.647	57,65%	23.072	52,15%	+28,50%
Total sales	51.429	100%	44.240	100%	+16,25%

Source: Company Data and PMI Capital Research Elaboration

Estimate revision - Euro m

Euro m	21A

22A	23E Old		23E New	24E Old	24E New	2025E

Revenues	50.8	59.3	57.7	64.5	63.2	70.3	76.0
yoy	+42%	+17%	+8%	+9%	+10%	+9%	+8%
EBITDA	6.0	8.7	7.6	9.2	10.2	10.4	11.6
margin	12%	15%	13%	14%	16%	15%	15%
EBIT	0.9	3.7	3.3	4.9	5.6	5.8	6.8
margin	2%	6%	6%	8%	9%	8%	9%
Net Profit	(0.9)	0.9	0.4	1.9	2.9	2.7	3.5
yoy	n.m.	201%	+174%	+117%	+633%	+41%	+30%
EPS	(0,15)	0,05	0,04	0,10	0,30	0,14	0,19

Euro m	21A

22A	23E Old		23E New	24E Old	24E New	2025E

Net Working Capital (NWC)	5.8	7.6	5.8	11.5	5.9	13.7	14.6
Fixed net assets	47.5	48.4	42.9	42.9	42.9	42.9	40.5
Funds	(3.9)	(4.6)	(4.1)	(4.2)	(4.0)	(4.1)	(4.0)
Net Capital Employed	49.3	51.4	44.6	50.2	44.8	52.4	51.1
Net Debt (Cash)	40.5	40.5	35.9	37.4	33.2	36.8	31.9
Equity	8.8	32.5	8.7	12.8	11.6	15.6	19.2

Sources

49.3

44.1

44.6 50.2

44.8 52.4

51.1

Source: Company Data and PMI Capital Research Estimates

Monday, May 15, 2023 - 6:30 PM	3

Equity Research

UPDATE NOTE FY22

Euronext Growth Milan

Major events occurred during 2022

With regard to the significant events that occurred during the year, it seems appropriate to mention, on a preliminary basis, what occurred in July 2022 when the company Clabo S.p.A. was notified of a precautionary seizure order, issued by the GIP of the Court of Ancona, aimed at the confiscation of Euro 1,684 thousand. This measure was taken on the basis of the crime hypotheses pursuant to Articles 110 and 316 bis of the Italian Criminal Code (so-called "Misappropriation") and Articles 110 and 648 ter 1 paragraph 2 of the Italian Criminal Code (so-called"Self-Money Laundering"), crimes which, according to the theory of the Public Prosecutor who conducted the investigation and endorsed by the GIP, were allegedly committed by the directors Pierluigi Bocchini and Paolo Bracceschi, at the time of the facts respectively Chairman and Director of Clabo S.p.A.

Specifically, the order in question referred to the alleged use in fraud of funds paid in November 2018 by Simest to Clabo S.p.A. as financing for the company's development plan in the United States of America. The device, issued on July 4, 2022, and notified to the company on July 18, 2022, had the effect, as early as July 13, 2022, of immediately suspending all of Clabo S.p.A.'s lines of credit, as well as its current accounts and cash and cash equivalents existing as of the date, up to the amount indicated.

In addition, the issuance of a similar measure by the judicial authority constituted a "Significant Event" for the purposes of the framework agreement signed with a part of Clabo's Creditor Class aimed at regulating the refinancing of a significant portion of Clabo's medium-term debt, empowering creditors to request the acceleration of repayments of outstanding loans, an even more serious consequence for the Company. Clabo S.p.A., in fulfillment of the disclosure requirements of the Italian Stock Exchange regulations, took steps to give ample and detailed information to the market about what had happened causing. As was widely predictable, a negative reaction from investors and a collapse of the share price by more than 11% in a single session (loss of capitalization of about €2 million).

Already on July 29, 2022, on appeal to the Ancona Review Court, the Company obtained the revocation of the seizure on about 80% of the amount. On December 13, 2022, the Cassation Court also annulled without referral the surviving part of the order, ending the precautionary proceedings.

In the meantime, Clabo S.p.A. had to negotiate a "waiver" with its financial creditors in order to be able to restore the operation of its credit lines, obtaining it on November 29, 2022. In the time between the suspension of the credit facilities and their restoration, the Company had to operate with enormous difficulties, unable to meet its payment commitments with its suppliers, slowing down the production process and consequently deliveries to customers. The costs for consulting services alone, necessary for the management of the judicial affair and its consequences on the management level, amounted to more than 300 thousand euros, in addition to the reputational and image damage that cannot be quantified for a listed company.

Monday, May 15, 2023 - 6:30 PM	4

Equity Research

UPDATE NOTE FY22

Euronext Growth Milan

VALUATION UPDATE

Based on our updated estimates and peers' multiple re-rating since our last update in October 2022, we set a new target price of Euro 4.38 p.s. (3.48 pr.) providing for an upside on the current stock price of 124%. Our valuation was obtained by weighing equally the DCF and the multiple comparison analysis. At our target price the stock would be trading at FY23E/24E EV/EBITDA multiples of 9.3x and 8.3x.

Our DCF model is based on a three-stage model with explicit estimates for 2023-26E, 5 years to 2031 with growth normalizing at 5% and terminal value discounted at 7.50% WACC and 1% growth.

Valuation Summary

	Method		Weight		Price (Eu p.s.)	Equity Value
			(Eu m)
Multiple analysis EV/EBITDA, P/E 23/25 Manufact. and EGM Peers	50%	3.41	35.37
DCF (WACC 7.50% and g 1.0%)	50%	5.36	55.53
	Target Price		100%		4.38	45.45
Source: PMI Capital Research Estimates

DCF Model

DCF Valuation

Euro m

WACC	7,5%
g	1,0%
Sum of PV 2023-26 FCFs	15.99	16,4%
Discounted terminal value	81.73	83,6%
Enterprise Value	97.72
Net Debt (FY22)	40.50
Minorities	1.70
Equity Value	55.53
N. of outstanding shares (m)	10,364.49
Fair Value p.s.	5.36

Source: PMI Capital Research Estimates

Monday, May 15, 2023 - 6:30 PM	5