Fervi S.p.A. | Industrial Machinery |
The MRO solution for every need
ADD| Fair Value: €24.2 | Current Price: €15.2 | Upside: +59.1%
€ Million | FY19A | FY20A | FY21A | FY22E | FY23E | FY24E | FY25E |
Total Revenues | 29.1 | 26.4 | 39.0 | 56.9 | 59.7 | 63.3 | 67.1 |
EBITDA | 4.5 | 4.1 | 5.8 | 8.1 | 8.9 | 9.9 | 10.9 |
margin | 15.4% | 15.5% | 14.8% | 14.2% | 14.9% | 15.6% | 16.3% |
Net Profit | 2.6 | 2.3 | 3.2 | 3.8 | 4.6 | 5.3 | 6.0 |
margin | 8.9% | 8.6% | 8.2% | 6.8% | 7.6% | 8.4% | 9.0% |
EPS (€) | 1.03 | 0.91 | 1.27 | 1.52 | 1.79 | 2.08 | 2.38 |
NFP | (0.9) | (3.0) | 10.4 | 8.6 | 3.5 | (1.8) | (7.8) |
Source: Company Data (2019-2021), KT&Partners' Elaboration (2022-2025)
Overview. Fervi Group is leader in the Maintenance, Repairs, and Operations (MRO) industry. Fervi Group's mission is to project, product, select, and distribute machinery, mechanical tools, fasteners, industrial applications 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 artisans to solidly improve the productivity and quality of their daily work, thanks to its 60,000 products' references.
Market overview. Although the MRO is considered a mature market compared to other sectors (i.e., technology), the Industry is characterized by a steady and sustainable growth and it is one of the most reliable Market in terms of cash generation. According to Precedence Research, the global MRO distribution market size reached $635.5bn in 2021 and is expected to growth over $798.6bn by 2030, showing a CAGR 2021-2030 of 2.6%, mainly driven by the manufacturing enterprises' goal to optimize production pr ocesses and minimize inefficiencies.
Group historical figures. Nonetheless revenues growth path slowdown in 2020 due to COVID- 19 outbreaks (-9% YoY), in 2021 Fervi Group set its record with €38mn of sales (+44.9% YoY), reporting a CAGR19-21 of +15%. In 2021, the growth was also driven by the newly acquired Rivit Srl (from September 2021). However, considering only Fervi Group's organic growth, the Group showed revenues increase of +22.4% YoY and a +11.6% over the 2019, mainly driven by Italian and European wholesale distribution market recovery post Covid-19. Together with the revenues growth registered in 2021, the Group showed EBITDA increase of 40% YoY, amounting to €5.8mn, with a margin at 14.8%. In FY21, Fervi Group registered a NFP of €10.4mn, increasing by +€13.4mn (-€3mn in 2020) following Rivit's acquisition and €0.66mn dividend payment.
Future Estimates. Our financial projections over the 2022-25 period are based on Fervi Group's business model and strategy. Starting from the top line, we anticipate sales revenues growing at a CAGR21A-25E of 15.2%, reaching €66.7mn in FY25E. We projected sales considering: i) Fervi Group's product portfolio expansion; ii) the strengthen of Fervi Group's presence abroad and in Italy; and iii) end-user base expansion also thanks the last acquisition, Mr. Worker (ecommerce platform). We expect EBITDA to experience a CAGR21A-25E of +17.3%, reaching €10.9mn in FY25E, with an EBITDA margin at 16.3% in FY25E (from 14.8% in FY21A). Looking at the bottom line, we project net income attributable to the Group at €6mn in 2025, growing at a CAGR21A-25E of +17.4%, and a net margin of 9%. Looking at Fervi Group's financial soundness, we expect NFP to progressively improve from a net debt of €10.4mn in FY21A to a net cash of €7.8mn in FY25E. It should be noted that given the Group's attention to dividends' distribution during the last years, in our estimate we also supposed an average dividend pay- out ratio at about 28% over the 2022E-2025E period.
Valuation. Our valuation - based on both market multiples and DCF method - returns an average equity value of €61.4mn or a fair value of €24.2ps, showing a potential upside of 59% on current market price.
Performance Chart - YTD
Vo lu me | Fe rvi SpA | FTSE Italia Growth |
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0 |
-5-10
-15 | 20.000 | ||||
-19.26 | |||||
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-25 | 0 | ||||
Jan-22 | Feb -22 | Mar-22 | Apr-22 | May-22 | Jun -22 |
Via della Posta, 10 - Piazza Affari, 20123 Milan- Italy Tel: +39.02.83424007 Fax: +39.02.83424011 segreteria@ktepartners.com
Initiation of Coverage
July 14th, 2022 - 7.00h
Equity Research Team
connect@ktepartners.com
Maria Teresa DI GRADO mdigrado@ktepartners.com+39 331 631 0793
Gabriele TRAPANI gtrapani@ktepartners.com+39 366 770 3290
Market Data | |
Main Shareholders | |
1979 Investimenti Srl | 74.78% |
Roberto Megna | 7.54% |
Guido Greco | 2.04% |
Mkt Cap (€ mn) | 38.6 |
EV (€ mn) | 49.0 |
Shares out. | 2.5 |
Free Float | 15.6% |
Market multiples | 2021 | 2022 | 2023 |
EV/EBITDA | |||
Fervi SpA | 8.5x | 6.1x | 5.5x |
Comps Median | 10.4x | 9.4x | 8.9x |
Fervi SpA vs Median | -18% | -35% | -38% |
P/E | |||
Fervi SpA | 12.1x | 9.9x | 8.3x |
Comps Median | 14.6x | 13.7x | 12.5x |
Fervi SpA vs Median | -17% | -28% | -33% |
Stock Data | |
52 Wk High (€) | 18.20 |
52 Wk Low (€) | 10.80 |
Avg. Daily Trading 90d | 791 |
Price Change 1w (%) | 2.36 |
Price Change 1m (%) | -1.94 |
Price Change YTD (%) | 4.11 |
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 AIM ITALIA MARKET RULES FOR COMPANIES
Fervi S.p.A.
Price: €15.2 | Fair Value: €24.2
Key Figures - Fervi Group SpA
Current price (€) | Fair Value (€) | Sector | Free Float (%) | ||||
15.20 | 24.2 | Industrial Machinery | 15.64 | ||||
Per Share Data | 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | 2025E |
Total shares outstanding (mn) | 2.50 | 2.50 | 2.50 | 2.54 | 2.54 | 2.54 | 2.54 |
EPS | 1.03 | 0.91 | 1.27 | 1.52 | 1.79 | 2.08 | 2.38 |
Dividend per share (ord) | 0.20 | 0.21 | 0.26 | 0.35 | 0.40 | 0.50 | 0.60 |
Dividend pay out ratio (%) | 28% | 21% | 29% | 28% | 26% | 28% | 29% |
Profit and Loss (EUR million) | 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | 2025E |
Total Revenues | 29.1 | 26.4 | 39.0 | 56.9 | 59.7 | 63.3 | 67.1 |
EBITDA | 4.5 | 4.1 | 5.8 | 8.1 | 8.9 | 9.9 | 10.9 |
EBIT | 3.4 | 3.0 | 4.4 | 5.4 | 6.3 | 7.2 | 8.2 |
EBT | 3.4 | 2.9 | 4.2 | 5.1 | 6.1 | 7.0 | 8.1 |
Taxes | (0.8) | (0.6) | (1.0) | (1.3) | (1.5) | (1.8) | (2.0) |
Tax rate | 23% | 22% | 24% | 25% | 25% | 25% | 25% |
Net Income | 2.6 | 2.3 | 3.2 | 3.8 | 4.6 | 5.3 | 6.0 |
Net Income attributable to the Group | 2.6 | 2.3 | 3.2 | 3.8 | 4.6 | 5.3 | 6.0 |
Balance Sheet (EUR million) | 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | 2025E |
Total fixed assets | 6.6 | 5.8 | 15.4 | 14.8 | 13.3 | 11.9 | 10.4 |
Net Working Capital (NWC) | 16.1 | 16.8 | 25.0 | 27.4 | 28.0 | 28.8 | 29.7 |
Provisions | (1.9) | (2.3) | (4.0) | (4.7) | (5.4) | (6.1) | (6.8) |
Total Net capital employed | 20.8 | 20.3 | 36.4 | 37.5 | 35.9 | 34.6 | 33.2 |
Net financial position/(Cash) | (0.9) | (3.0) | 10.4 | 8.6 | 3.5 | (1.8) | (7.8) |
Group Shareholder's Equity | 21.7 | 23.2 | 26.0 | 28.9 | 32.5 | 36.5 | 41.0 |
Minorities | - | - | - | - | - | - | - |
Total Shareholder's Equity | 21.7 | 23.2 | 26.0 | 28.9 | 32.5 | 36.5 | 41.0 |
Cash Flow (EUR million) | 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | 2025E |
Net operating cash flow | 3.7 | 3.5 | 4.7 | 6.7 | 7.3 | 8.1 | 8.9 |
Change in NWC | (1.5) | (0.7) | (8.2) | (2.5) | (0.6) | (0.8) | (0.8) |
Capital expenditure | (3.2) | (0.2) | (9.9) | (2.0) | (1.1) | (1.2) | (1.2) |
Other cash items/Uses of funds | 0.1 | 0.3 | 0.6 | 0.6 | 0.6 | 0.7 | 0.7 |
Free cash flow | (0.9) | 2.9 | (12.7) | 2.9 | 6.3 | 6.7 | 7.5 |
Enterprise Value (EUR million) | 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | 2025E |
Market Cap | 38.0 | 38.0 | 38.0 | 38.6 | 38.6 | 38.6 | 38.6 |
Minorities | - | - | - | - | - | - | - |
Net financial position/(Cash) | (0.9) | (3.0) | 10.4 | 8.6 | 3.5 | (1.8) | (7.8) |
Enterprise value | 37.1 | 35.0 | 48.4 | 47.2 | 42.1 | 36.8 | 30.8 |
Ratios (%) | 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | 2025E |
EBITDA margin | 15.4% | 15.5% | 14.8% | 14.2% | 14.9% | 15.6% | 16.3% |
EBIT margin | 11.7% | 11.5% | 11.3% | 9.5% | 10.5% | 11.4% | 12.2% |
Gearing - Debt/equity | -4.1% | -12.7% | 40.0% | 29.7% | 10.7% | -5.1% | -19.0% |
Interest cover on EBIT | 1.6% | 4.0% | 3.8% | 4.4% | 3.1% | 2.1% | 1.3% |
NFP/EBITDA | -19.9% | -72.0% | 180.2% | 106.4% | 39.0% | -18.7% | -71.1% |
ROCE | 16.4% | 15.0% | 12.1% | 14.3% | 17.5% | 20.8% | 24.6% |
ROE | 11.9% | 9.8% | 12.2% | 13.3% | 14.0% | 14.5% | 14.7% |
EV/Sales | 1.68x | 1.85x | 1.26x | 0.86x | 0.82x | 0.77x | 0.73x |
EV/EBITDA | 10.91x | 11.92x | 8.49x | 6.07x | 5.51x | 4.97x | 4.48x |
P/E | 14.94x | 16.90x | 12.13x | 14.94x | 14.94x | 14.94x | 14.94x |
Free cash flow yield | -1.8% | 6.0% | -26.0% | 5.9% | 12.9% | 13.7% | 15.4% |
Growth Rates (%) | 2019A | 2020A | 2021A | 2022E | 2023E | 2024E | 2025E |
Sales | 18.9% | -9.1% | 47.3% | 46.0% | 5.0% | 6.0% | 6.0% |
EBITDA | -0.5% | -8.4% | 40.4% | 39.9% | 10.2% | 11.0% | 10.7% |
EBIT | 32.8% | -10.8% | 44.1% | 22.7% | 16.6% | 14.9% | 13.4% |
Net Income | 34.6% | -11.6% | 39.3% | 21.0% | 18.3% | 16.1% | 14.3% |
Source: Company Data (2019-2021), KT&Partners' forecasts (2022-2025)
July 14, 2022 ● 2
Fervi S.p.A.
Price: €15.2 | Fair Value: €24.2
Contents
Company Overview | 7 |
Fervi Group | 7 |
A broad and well diversified product assortment | 8 |
Durable cash flows drive a sustainable dividend policy growth | 11 |
Strong M&A Track Record in a large, fragmented and highly | 12 |
attractive market | 12 |
A Sustainable and Inclusive ESG Company | 13 |
The Group's History | 14 |
Ownership and Group Structure | 16 |
Key people and Group Organization | 17 |
Business Model | 18 |
Scouting and R&D | 18 |
Purchasing and Product Marketing | 18 |
Logistic and Production | 19 |
Sales and Marketing | 19 |
After-sale support | 21 |
Market Overview | 22 |
The MRO Industry | 23 |
Do-it-Yourself (DIY) market | 26 |
Market Positioning | 28 |
Historical Financials | 30 |
Revenues Breakdown | 30 |
Profitability Analysis | 31 |
Capital Structure Analysis | 32 |
Group's Strategy | 33 |
Deconstructing Forecasts | 34 |
Valuation | 36 |
Peer Comparison | 36 |
Market Multiples Valuation | 39 |
DCF Valuation | 40 |
DISCLAIMER | 41 |
July 14, 2022 ● 3
Fervi S.p.A.
Price: €15.2 | Fair Value: €24.2
Key Charts
Total Revenues (€mn) | Gross Profit, EBITDA and Net Income (€mn, %)1 |
39.0
29.1
26.4
2019A | 2020A | 2021A |
Total Revenues
20.5 | ||||||||||||||||||||||||||
0 | ||||||||||||||||||||||||||
5 | 14.8 | |||||||||||||||||||||||||
13.4 | ||||||||||||||||||||||||||
0 | 51% | 50.6% | 52.7% | |||||||||||||||||||||||
5.8 | ||||||||||||||||||||||||||
5 | 4.5 | 4.1 | 3.2 | |||||||||||||||||||||||
2.3 | ||||||||||||||||||||||||||
2.6 | ||||||||||||||||||||||||||
15.4% | 15.5% | 14.8% | ||||||||||||||||||||||||
8.9% | 8.6% | |||||||||||||||||||||||||
0 | 8.2% | |||||||||||||||||||||||||
2019A | 2020A | 2021A | ||||||||||||||||||||||||
Gross Profit | EBITDA | Net Income | Gross Margin | EBITDA margin | Net margin | |||||||||||||||||||||
Sales Revenues breakdown (€mn) | Trade Working Capital (€mn, %) | |||||||
37.9 | 68 | |||||||
0.1 | 67% | |||||||
28.7 | 66 | |||||||
0.7 | 16.6 | |||||||
26.2 | 64 | |||||||
0.4 | 63.4% | |||||||
0.1 | 0.7 | |||||||
62 | ||||||||
9.0 | 9.4 | |||||||
0.2 | 0.3 | 10.0 | ||||||
0.4 | 26.5 | 19.4 | 60 | |||||
0.3 | 58.8% | 11.4 | 10.7 | |||||
7.1 | 6.1 | 58 | ||||||
-3.5 | -3.5 | |||||||
-10.6 | 56 | |||||||
20.6 | 19.3 | |||||||
54 | ||||||||
2019A | 2020A | 2021A | 2019A | 2020A | 2021A | |||
Italy Europe | Americas Africa | Asia | Inventory | Trade Receivables | Trade Payables | TWC/Sales |
Net Income, Dividend Pay-Out Ratio(€mn, %) | NFP, Change in Shareholders' Equity and NFP/EBITDA (€mn) | |||||||||||||||||||||||
.0 | 10.4 | 2.0 | ||||||||||||||||||||||
1.8x | ||||||||||||||||||||||||
.0 | 1.5 | |||||||||||||||||||||||
28.5% | 28.9% | .0 | ||||||||||||||||||||||
1.0 | ||||||||||||||||||||||||
.0 | ||||||||||||||||||||||||
20.6% | .0 | 0.5 | ||||||||||||||||||||||
3.2 | ||||||||||||||||||||||||
.0 | ||||||||||||||||||||||||
2.6 | 0.2 | 0.0 | ||||||||||||||||||||||
2.3 | (0.2x) | (0.7x) | ||||||||||||||||||||||
- | ||||||||||||||||||||||||
(0.0) | (0.2) | (0.5 | ||||||||||||||||||||||
0) | ||||||||||||||||||||||||
(0.9) | ||||||||||||||||||||||||
0) | (3.0) | (1.0 | ||||||||||||||||||||||
2019A | 2020A | 2021A | 2019A | 2020A | 2021A | |||||||||||||||||||
Net Income | Dividend pay-out ratio | NFP/(Cash) Adjusted | Change in Total Shareholders'Equity | |||||||||||||||||||||
NFP/EBITDA | ||||||||||||||||||||||||
1 Margins are calculated on Total Revenues
July 14, 2022 ● 4
Fervi S.p.A.
Price: €15.2 | Fair Value: €24.2
Investment Case
The solution for every need. Fervi Group's main goal is to propose the solution for its clients' need, thanks to its wide product portfolio. Given Fervi Group's strategy to constantly expand its assortment, the Group catalogues reference increase from 3,800 references in 2012 to over 60,000 in 2022. The Group's offer includes 9 different product's categories including machine tools, hand tools, abrasives and fixing items, with more than 60,000 references available to maintenance and repair professionals in the industrial, handcraft and automotive sectors.
Strong M&A track record. In order to expand its product portfolio and to increase its international presence, Fervi Group accelerates its market share consolidation through M&A activities. Indeed, in the last years the Group completed five acquisitions both in Italy and abroad. Fervi started its M&A activity in 2015, acquiring the 100% of Riflex, with the aim to expand its product portfolio, introducing high-quality abrasive products. In 2018, in line with its strategy to straight its international presence, Fervi Group acquired the 40% of the Spanish Sitges Maquinas y Acesorios. Whereas, in 2019, Fervi acquired the 100% of Vogel Germany Gmbh, expanding its offer with over 5,000 references of high-end measuring instruments, extending also its wholesaler network thanks to 100 worldwide Vogel distributors. Finally, in 2021, Fervi Group acquired the 100% of Rivit, specialized in the supply of fastening systems and the 5.4% of Esales, innovative SME and digital distributor of professional MRO equipment via its proprietary portal, Mister Worker, whose trademark is registered in over 40 countries.
Competitive positioning in a fragmentated market. The MRO is a very fragmentated industry, with the top five companies controlling only the 8-10%of the total market share. However, thanks to its distinctive business model, based on a go-to-marketapproach supported by a wide product portfolio, Fervi Group boasts an extremely broad consolidated market presence and reputation in the equipment for maintenance and repair professionals, especially in Italy and in Europe.
Revenues growth, profitability, and cash-flow generation drive a sustainable dividend
policy growth. In the last years, Fervi Group showed a growth path both in terms of revenues and profitability, and achieving constant cash-flow generation as well. During the 2015-2021 period, Fervi enjoyed a total revenues CAGR of 10.4%, with an average double-digit EBITDA margin of 17%. The Group's profitability growth, together with a low capital-intensive business model, allowed Fervi to generate an average Operating Cash flow over the 2016- 2021 of €2.1mn, with an average Operating Cash Flow/EBITDA ratio of 47%, also including the M&A's consolidation. Thanks to its durable cash-flow generation, since 2018 to 2021 Fervi paid in total €2.1mn of dividends, with an average pay-out ratio of 24.35%.
A successful Management Team. Fervi Group can rely on a top management with proven experiences in M&A transactions, including cross-borders, management and control. Fervi Group's key figures have years of experience on different markets that consolidated the medium-long term vision guaranteeing effective and valuable strategic approaches. Group top management team contribute to Fervi Group's growth through their leadership, expertise, know-how, and abilities to create meaningful relationships with stakeholders. Moreover, Fervi Group's top management, plays a key role in determining the Company's success, defining the Group's strategies and its direction.
Growing commitment to sustainability. Fervi Group has always showed strong attention to environmental and social issues by both implementing a sustainable environmental strategy and taking part in social inclusion projects. Indeed, in 2022, Fervi Group obtained the prestigious ESG Certification, to renew every three years, with rating A, issued by Certification S.r.l. which evaluates corporate sustainability with regard to the environment, workers and governance.
Seeking to expand its portfolio product and to strengthen its competitive position. To further consolidate its market presence and reputation, Fervi Group's plans: i) to keep
July 14, 2022 ● 5
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Fervi S.p.A. published this content on 14 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 July 2022 19:53:03 UTC.