Fervi S p A : 05/04/2023 - KT&Partners Research

Fervi S.p.A.

Industrial Machinery

Rivit's Consolidation Contributes to Fervi Acceleration

ADD| Fair Value: €23.6 (€23.2) | Current Price: €16.0 | Upside: +47.3%

€ Million	FY20A	FY21A	FY22A	FY23E	FY24E	FY25E	FY26E
Total Revenues	26.4	39.0	58.2	59.7	63.3	67.1	71.1
EBITDA	4.1	5.8	7.9	8.9	9.9	10.9	11.8
margin	15.5%	14.8%	13.7%	14.9%	15.6%	16.3%	16.6%
Net Profit	2.3	3.2	3.6	4.5	5.1	5.9	9.1
margin	8.6%	8.2%	6.2%	7.5%	8.1%	8.8%	12.8%
EPS (€)	0.90	1.25	1.42	1.76	2.03	2.34	3.60
NFP	(3.0)	10.4	11.2	7.3	2.3	(3.1)	(11.9)

Source: Company data (2020A-22A), KT&Partners' elaboration (2023E-26E).

FY22A Financial Results. In a global macroeconomic environment characterized by a high level of uncertainty, in 2022, for the second year in a row Fervi Group broke its sales record, reaching €57.3m (+50.8% YoY), in line with our latest estimate of €56.6mn. This growth comes mainly from the newly acquired Rivit Srl, as in 2021 Rivit Srl was consolidated only for three months (from the purchasing date in September 2021). The FY22A EBITDA improved from €5.8mn in FY21A to €7.9mn in FY22A (+37.6% YoY), in line with our estimate of €8.1mn, with a margin slightly below the previous year (from 14.8% to 13.7%) given raw materials price increases (especially iron and steel) and the higher freight costs, partially mitigated with an increase of Fervi Group's list price. In FY22A, net income was €3.6mn (+13.5% YoY), lower than our prior estimate of €3.8mn. However, adjusting for the effect of Rivit's technical know-how amortization, FY22A adjusted net income stood at €4.5mn. Net debt worsened from €10.4mn to €11.2mn (vs our estimate of €8.6mn) mainly due to a higher TWC uptake. Finally, the BoD announced the purpose to distribute in May 2023 a dividend per share of €0.40, higher than the €0.35 distributed in 2022, for a total cash-out of €1mn.

Changes in Estimates. On the back of Fervi Group's FY22A financial results, mostly aligned with our latest estimates, we left unchanged our FY23E-25E projections and included FY26E estimates. Total revenues are expected to reach €59.7mn in 2023, growing at a CAGR22A-26E of +5.1% up to €71.1mn in FY26E. EBITDA is expected to reach €8.9mn in FY23E, growing at a CAGR22A-26E of +10.4% up to €11.8mn in FY26E. Looking at marginality, we expect FY23E EBITDA margin at 14.9%, then improving in the following years as we anticipate more favourable transport and raw materials' costs compared to the 2022A-23E period, reaching 16.6% in FY26E. We anticipate FY23E net income at €4.5mn with a net margin of 7.5%, while for the next years we foresee a growth equal to a CAGR22A-26E of 26.1%, reaching €9.1mn by the end of 2026E. Finally, we expect a FY23E net debt of €7.3mn, considering the dividend cash-out of €1mn, with a progressively improvement up to a cash position of -€11.9mn in FY26E, also including an average dividend pay-out ratio of 28% in the 2023E-2026E period.

Valuation. We updated our valuation based on both DCF and EV/EBITDA and P/E multiple models. Therefore, we obtained an equity value of €59.9mn or €23.6ps, +47.3% on current market price.

Performance Chart - YTD

Research Update

April 5, 2023 - 7.00 h

Equity Research Team

[e-mail]

Maria Teresa DI GRADO [e-mail][phone]

Gianluca GENGO

[e-mail]

[phone]

	Market Data
Main Shareholders
1979 Investimenti Srl	74.78%
Roberto Megna	7.54%
Guido Greco	2.04%
Mkt Cap (€ mn)	38.2
EV (€ mn)	48.6
Shares out.	2.5
Free Float	15.6%

Market multiples	2023	2024	2025
EV/EBITDA
Fervi SpA	5.8x	5.3x	4.7x
Comps Average	10.4x	10.1x	9.8x
Fervi SpA vs Average	-44%	-48%	-52%
P/E
Fervi SpA	9.1x	7.9x	6.8x
Comps Average	14.8x	15.6x	13.5x
Fervi SpA vs Average	-38%	-49%	-49%

		Stock Data
	52 Wk High (€)	17.40
	52 Wk Low (€)	13.75
	Avg. Daily Trading 90d	488
	Price Change 1w (%)	3.23
	Price Change 1m (%)	-0.31
	Price Change YTD (%)	6.31

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KT&PARTNERS PREPARED THIS DOCUMENT PURSUANT TO AN ENGAGEMENT LETTER ENTERED INTO WITH MIT SIM S.P.A. ACTING AS SPECIALIST IN ACCORDANCE WITH ART. 35 OF EURONEXT GROWTH MILAN MARKET RULES FOR COMPANIES

Fervi S.p.A.

Price: €16.0| Fair Value: €23.6

Key Figures - Fervi Group SpA

Current price (€)		Fair Value (€)		Sector				Free Float (%)
16.00		23.6		Industrial Machinery			15.64
Per Share Data	2019A	2020A	2021A	2022A	2023E	2024E	2025E	2026E
Total shares outstanding (mn)	2.54	2.54	2.54	2.54	2.54	2.54	2.54	2.54
EPS	1.02	0.90	1.25	1.42	1.76	2.03	2.34	3.60
Dividend per share (ord)	0.20	0.21	0.26	0.35	0.40	0.50	0.60	0.60
Dividend pay out ratio (%)	28%	21%	29%	28%	28%	28%	30%	26%
Profit and Loss (EUR million)	2019A	2020A	2021A	2022A	2023E	2024E	2025E	2026E
Total Revenues	29.1	26.4	39.0	58.2	59.7	63.3	67.1	71.1
EBITDA	4.5	4.1	5.8	7.9	8.9	9.9	10.9	11.8
EBIT	3.4	3.0	4.4	5.1	6.5	7.4	8.5	9.3
EBT	3.4	2.9	4.2	5.1	6.2	7.2	8.3	9.1
Taxes	(0.8)	(0.6)	(1.0)	(1.4)	(1.8)	(2.1)	(2.4)	-
Tax rate	23%	22%	24%	29%	29%	29%	29%	0%
Net Income	2.6	2.3	3.2	3.6	4.5	5.1	5.9	9.1
Net Income attributable to the Group	2.6	2.3	3.2	3.6	4.5	5.1	5.9	9.1
Balance Sheet (EUR million)	2019A	2020A	2021A	2022A	2023E	2024E	2025E	2026E
Total fixed assets	6.6	5.8	15.4	14.5	14.2	13.0	11.8	10.6
Net Working Capital (NWC)	16.1	16.8	25.0	29.5	30.1	31.0	32.0	32.9
Provisions	(1.9)	(2.3)	(4.0)	(4.1)	(4.8)	(5.6)	(6.4)	(7.3)
Total Net capital employed	20.8	20.3	36.4	39.9	39.5	38.4	37.3	36.2
Net financial position/(Cash)	(0.9)	(3.0)	10.4	11.2	7.3	2.3	(3.1)	(11.9)
Group Shareholder's Equity	21.7	23.2	26.0	28.7	32.2	36.0	40.5	48.1
Minorities	-	-	-	-	-	-	-	-
Total Shareholder's Equity	21.7	23.2	26.0	28.7	32.2	36.0	40.5	48.1
Cash Flow (EUR million)	2019A	2020A	2021A	2022A	2023E	2024E	2025E	2026E
Net operating cash flow	3.7	3.5	4.7	6.5	7.1	7.8	8.5	9.1
Change in NWC	(1.5)	(0.7)	(8.2)	(4.5)	(0.6)	(0.9)	(0.9)	(0.9)
Capital expenditure	(3.2)	(0.2)	(9.9)	(2.0)	(2.0)	(1.1)	(1.2)	(1.2)
Other cash items/Uses of funds	0.1	0.3	0.6	(0.0)	0.6	0.7	0.7	0.7
Free cash flow	(0.9)	2.9	(12.7)	(0.0)	5.1	6.4	7.1	7.8
Enterprise Value (EUR million)	2019A	2020A	2021A	2022A	2023E	2024E	2025E	2026E
Market Cap	28.4	29.2	37.1	38.2	40.6	40.6	40.6	40.6
Minorities	-	-	-	-	-	-	-	-
Net financial position/(Cash)	(0.9)	(3.0)	10.4	11.2	7.3	2.3	(3.1)	(11.9)
Enterprise value	27.5	26.2	47.5	49.4	47.9	42.9	37.5	28.7
Ratios (%)	2019A	2020A	2021A	2022A	2023E	2024E	2025E	2026E
EBITDA margin	15.4%	15.5%	14.8%	13.7%	14.9%	15.6%	16.3%	16.6%
EBIT margin	11.7%	11.5%	11.3%	8.8%	10.8%	11.7%	12.6%	13.0%
Gearing - Debt/equity	-4.1%	-12.7%	40.0%	39.0%	22.7%	6.4%	-7.7%	-24.8%
Interest cover on EBIT	1.6%	4.0%	3.8%	1.4%	3.4%	2.6%	1.9%	1.5%
NFP/EBITDA	-19.9%	-72.0%	180.2%	140.9%	82.3%	23.4%	-28.6%	-101.0%
ROCE	16.4%	15.0%	12.1%	12.9%	16.4%	19.3%	22.7%	25.7%
ROE	11.9%	9.8%	12.2%	12.6%	13.9%	14.3%	14.7%	19.0%
EV/Sales	1.78x	1.96x	1.33x	0.89x	0.87x	0.82x	0.77x	0.73x
EV/EBITDA	11.54x	12.61x	8.98x	6.52x	5.83x	5.25x	4.74x	4.39x
P/E	15.73x	17.79x	12.77x	11.25x	9.11x	7.89x	6.85x	4.45x
Free cash flow yield	-1.7%	5.9%	-25.8%	-0.1%	10.2%	13.0%	14.3%	15.8%
Growth Rates (%)	2019A	2020A	2021A	2022A	2023E	2024E	2025E	2026E
Sales	18.9%	-9.1%	47.3%	49.3%	2.6%	6.0%	6.0%	6.0%
EBITDA	-0.5%	-8.4%	40.4%	37.6%	12.0%	11.0%	10.7%	7.9%
EBIT	32.8%	-10.8%	44.1%	17.1%	25.7%	14.4%	14.5%	9.5%
Net Income	34.6%	-11.6%	39.3%	13.5%	23.5%	15.4%	15.3%	53.9%

Source: Company Data (2019-2021), KT&Partners' forecasts (2022-2025)

April 5, 2023 ● 2

Fervi S.p.A.

Price: €16.0| Fair Value: €23.6

Key charts

Total Revenues (€mn)

Gross Profit and EBITDA (€mn, %)1

30.0

58.2

		25.0
	39.0	20.0
26.4		15.0	50.6%
	10.0	13.4
		5.0	4.1
			15.5%
			-	2020A
2020A	2021A	2022A

20.5

52.7%

5.8

14.8%

2021A

28.0

48.1%

7.9

13.7%

2022A

100

90.0

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0%

Total Revenues

Gross Profit

EBITDA

Gross Margin

EBITDA margin

Sales Revenues breakdown (€mn)

Trade Working Capital (€mn, %)

				57.3	0.0
				1.3	0.0
		37.9	0.7	0.5	0.0
	0.3
		0.1	1.8	0.0
26.2	0.1		0.7	12.8	0.0	9.4
	0.3
					10.7
	6.1		10.0	40.9	-	(3.5)
	19.3		26.5		.0)
					.0)

63.4%

16.6

67.0%

19.4

(10.6)

15.9

67.0%

23.3

(9.8)

75.0

73.0

71.0

69.0

67.0

65.0

63.0

61.0

59.0

57.0

2020A

2021A

2022A

2020A

Italy

Europe

Americas

Africa

Asia

Tot

Inventory

2021A2022A

Trade Receivables Trade Payables TWC/Sales

Net Income, Dividend Pay-Out Ratio (€mn, %)

28.5%

28.9%

20.6%

NFP, Change in Shareholders' Equity and NFP/EBITDA (€mn)

1.8x

1.4x

		3.2	3.6						0.2	0.0
2.3
			(0.2)
							(0.7x)
2020A	2021A	2022A			2020A	2021A	2022A
		Net Income		Dividend pay-out ratio						NFP/(Cash) Adjusted

Change in Total Shareholders'Equity

NFP/EBITDA

1 Margins are calculated on Total Revenues

April 5, 2023 ● 3

Fervi S.p.A.

Price: €16.0| Fair Value: €23.6

Overview

Company description

Fervi S.p.A. is an Italian company established in 1978 in Vignola (MO), leader in the

Maintenance, Repairs, and Operations (MRO) industry.

Fervi Group's mission is to project, product, select, and distribute machinery, mechanical tools, and equipment at the best quality-price ratio, guaranteeing safety and service standards well above its direct competitors. In order to achieve this objective, Fervi Group offers the most suitable, functional, and safest products to workers and the artisans to solidly improve the productivity and quality of their daily work.

The Group's offer nine groups' product, including machine tools, hand tools, abrasives, and more than 60,000 references available to maintenance and repair professionals in the industrial, artisan, and automotive sectors. Given Fervi Group's strategy to constantly expand its assortment, the Group catalogue reference increase from 3,800 references in 2012 to over 60,000 in 2022. This wide product assortment, together with a careful attention to innovation and a cutting-edge customer support, has enabled Fervi Group to become the first Italian group in the MRO sector.

Investment case

• The Group provides solutions for every need, with a very broad portfolio of 9 different products' categories and 60,000+ references.
• The Group over the years has scored a proven M&A track record, since 2015 it has increased its international presence, completing five acquisitions both in Italy and abroad, also expanding its portfolio product.
• The Group boasts a competitive positioning in a very fragmentated market, thanks to its distinctive business model, based on a go-to-marketapproach supported by a wide product portfolio.
• Constant revenues growth, profitability and cash-flow generation led the Group to a sustainable dividend policy. Indeed, The Group achieved a total revenues CAGR 2015-21of 10.4% and an average double-digitEBITDA margin of 17%. In addition, thanks to its strong cash generation, with an average Operating Cash flow over the 2016-2021of €2.1mn and an average Operating Cash Flow/EBITDA ratio of 47%, the Group since 2018 to 2021 paid in a total €2.1mn of dividends, with an average pay-outratio of 24.35%.
• Fervi Group can rely on a successful management team, with proven experiences in M&A transactions, including cross-border,and years of experience in different markets that consolidated the medium-longterm vision of the Group.
• The Group has always been committed to sustainability, showing strong attention to environmental and social issues by both implementing a sustainable environmental strategy and taking part in social inclusion projects.
• Fervi Group's plans are aimed at further consolidating its market presence, reputation, and widening its product portfolio, with business strategy growth based on: i) external growth, through an acquisition strategy that has the dual objective of expanding its market share and introducing new products into its catalogue; ii) organic growth, introducing new products through activity of scouting and product marketing; and iii) extending relationship development with Digital and GDS.

April 5, 2023 ● 4

Fervi S.p.A.

Price: €16.0| Fair Value: €23.6

FY22 Financial Results

In a global macroeconomic environment characterized by a high level of uncertainty, in 2022, for the second year in a row Fervi Group broke its sales record, reaching €57.3mn (+50.8% YoY), in line with our latest estimate of €56.6mn.

This growth comes mainly from the newly acquired Rivit Srl, as in 2021 Rivit Srl was consolidated only for three months (from the purchasing date in September 2021).

The FY22A EBITDA improved from €5.8mn in FY21A to €7.9mn in FY22A (+37.6% YoY), in line with our estimate of €8.1mn. Looking at marginality, FY22A EBITDA margin decreased by 0.9pp, from 14.8% to 13.7%, given the numerous raw materials price increases (especially iron and steel) and the relevant freight costs, partially mitigated with an increase of Fervi Group's list price.

In FY22A, Fervi reported a net income of €3.6mn (+13.5% YoY), lower than our prior estimate of €3.8mn. However, if adjusting for the effect of Rivit's technical know-how amortization, FY22A adjusted net income stood at €4.5mn. Net debt worsened from €10.4mn to €11.2mn (vs our estimate of €8.6mn) mainly due to a higher TWC uptake.

Finally, the BoD announced the purpose to distribute in May 2023 a dividend per share of €0.40 (vs €0.35 in 2022), for a total cash-out of €1mn.

FY20A-22A Income Statement vs FY22 Estimates

Source: KT&Partners' Elaboration on Company Data

April 5, 2023 ● 5