1H23: yet another solid set of results
Sector: Fashion & Luxury
Strong top-line growth (+25% YoY), EBITDA margin at 26%. Fope announced a solid set of 1H23 results with sales of Euro 34.7 m, up 25% YoY driven by increase in volumes across all regions and benefitting from a strong order portfolio at the end of FY22. EBITDA came in at Euro 9.1 m, +37% YoY and with an EBITDA margin of 26.2% vs. 24.0% in 1H22 and 25.5% for the full year 2022, and above our expectations for the full year (23.5%). The increase was mainly to be attributed to operating leverage more than offsetting an increase in personnel costs by +32% reflecting some new hiring and salary adjustments and higher marketing spending in line with Management strategy to support international expansion. Net Profit came in at Euro 5.6 m, +19% YoY (Euro 4.7 m in 1H22 m), after D&As of c. Euro 1.0 m (Euro 0.9 m in 1H22). On the balance sheet, Net Debt stood at Euro 5.0 m, up from a cash position of Euro 1.5 m at year-end2022 after some WC absorption (Euro 5.8 m) mainly due to a volume related increase in trade receivables, an increase in inventory of raw materials (gold and diamonds), investments of c. Euro 1.3 m mainly related to production equipment, opening of new SiS (shop in shops), IT system (the Group is currently implementing SAP), and dividend payments of Euro 4.3 m.
Expansion in global luxury markets, investments in brand awareness and sustainability to support mid-term growth. According to the BainAltagamma research, the general outlook for the global Personal Luxury Goods market, which saw an excellent first half of 2023, looks reasonably optimistic for the rest of the year. Growth is expected to normalize after the post covid euphoria in 2022 and expected at mid-to-highsingle digit level. Management did not provide guidance for FY23 but expressed confidence on a positive result for the full year, confirmed also by current trading. In our opinion, Fope's unceasing focus on brand expansion in luxury markets with high growth potential (opening of its third flag ship store in Tokyo in June and important partnerships in Dubai and Kuala Lumpur last year) coupled with a strategy aiming at important reinvestments in marketing to increase brand awareness, and sustainability should support growth in the mid-term.Finally, we highlight that that at the end of April Management announced the approval of a Euro 5.0 capital increase to raise resources to implement the Company's log-term-strategyand increase the limited free float. Regarding sustainability, the Group recently released its sustainability report which highlighted the achievement of carbon neutrality in FY22. Given all the above we reiterate our positive outlook on the stock.
New estimates and target price. We made some adjustments to our estimates to factor in the general economic slowdown and consumer caution particularly in some of the Group's key markets (UK and Germany). We now expect FY23 sales of Euro 67 m (Euro 70 m pr.). We forecast EBITA margin in the second half of the year somewhat below 1H23 following the lower sales volumes and an acceleration in marketing expenses, resulting in an EBITDA margin for the full year of c. 23.5%. We recall that Fope typically hedge gold price 12-18 months in advance, which, if necessary, gives Management plenty of time to program price list adjustments leaving gross profit largely unchanged. We maintained our assumptions for sales growth rate and profitability margins in FY24 while adding FY25 to our explicit forecast. Overall, we made average change in Sales, EBITDA and EPS of - 4%, -4% and -5% respectively. Running our DCF and multiple based valuation model on our estimates and up-to-date market data including a -16% derating of peers' multiples, we finetuned our target price now at Euro 39.17 p.s. (Euro 41.01 p.s. pr.) providing for a potential upside of c. 31%. At our target price the stock would be trading at P/E 23-24 of 21.4x and 18x respectively vs. peers at 25.0x and 19.7x and current 16.3x and 13.7x.
Equity Research
UPDATE NOTE 1H23
Euronext Growth Milan
Target Price 39.17 (41.01 pr.)
Market Cap (€ m) 161
EV (€ m) 166
Market Price (€) 29.80
As of October 2nd, 2023
Share Data | |||||
Market | Euronext Growth Milan | ||||
Reuters/Bloomberg | FPE.MI/FPE:IM | ||||
ISIN | IT0005203424 | ||||
N. of Shares | 5,399,608 | ||||
Free Float | 13.10% | ||||
Main Shareholder | Diego Nardin | ||||
Financials | 22A | 23E | 24E | 25E | |
Sales | 62,2 | 66,5 | 74,5 | 83,4 | |
YoY % | 54% | 7% | 12% | 12% | |
EBITDA | 15,8 | 15,6 | 17,9 | 20,4 | |
EBITDA % | 25,5% | 23,5% | 24,0% | 24,5% | |
EBIT | 13,9 | 13,7 | 16,2 | 18,7 | |
EBIT % | 22,4% | 20,5% | 21,7% | 22,5% | |
Net Income | 10,8 | 9,9 | 11,7 | 13,6 | |
Net Debt | (1,5) | (0,2) | (4,1) | (8,8) | |
Net Equity | 33,6 | 39,1 | 46,6 | 55,3 | |
Performance | |||||
1M | 3M | 1Y | |||
Absolute | -7% | -7% | +19% | ||
Relative (FTSE Italia | +1% | +3% | +28% | ||
Growth) | |||||
52-week High/Low (Eu) | 38.6 | / | 24.0 |
FOPE S.p.A. vs. FTSE Italia Growth | |||||||
1.400 | Indexed Price Performance with target volume (Actual) | Price (Indexed to 100.00) | |||||
Volume | FOPE S.p.A. | FTSE Italia Growth | |||||
1.200 | |||||||
1.000 | |||||||
800 | |||||||
600 | |||||||
400 | 150.000 | ||||||
200 | 100.000 | ||||||
50.000 | |||||||
0 | 0 | ||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
Source: FactSet Prices |
Luisa Primi
l.primi@irtop.com
Tuesday, October 3, 2023 6:00 PM | 1 |
Equity Research | |||||||||
UPDATE NOTE 1H23 | |||||||||
Euronext Growth Milan | |||||||||
KEY FINANCIALS | |||||||||
Profit&Loss Statement | 2019A | 2020A | 2021A | 2022A | 2023E | 2024E | 2025E | ||
Sales | 35,0 | 26,0 | 40,3 | 62,2 | 66,5 | 74,5 | 83,4 | ||
EBITDA | 6,8 | 3,9 | 8,8 | 15,8 | 15,6 | 17,9 | 20,4 | ||
EBIT | 5,4 | 2,3 | 6,8 | 13,9 | 13,7 | 16,2 | 18,7 | ||
Financial Income (charges) | (0,5) | (0,3) | 0,0 | (0,8) | (0,1) | (0,1) | (0,1) | ||
Pre-tax profit (loss) | 5,0 | 2,1 | 6,8 | 13,2 | 13,6 | 16,1 | 18,6 | ||
Taxes | (0,1) | (0,4) | (1,80) | (2,3) | (3,7) | (4,3) | (5,0) | ||
Net profit (loss) Group | 4,8 | 1,7 | 5,0 | 10,8 | 9,9 | 11,7 | 13,6 | ||
Balance Sheet | |||||||||
Fixed assets | 12,6 | 13,7 | 12,8 | 14,2 | 13,9 | 14,2 | 14,5 | ||
NWC | 11,2 | 12,1 | 13,9 | 20,7 | 27,7 | 31,0 | 34,8 | ||
M/L Funds | (3,0) | (2,9) | (2,8) | (2,7) | (2,7) | (2,7) | (2,7) | ||
Net Capital Employed | 20,9 | 23,0 | 24,0 | 32,1 | 38,9 | 42,5 | 46,5 | ||
Net Debt/(Cash) | 0,1 | 2,4 | (1,9) | (1,5) | (0,2) | (4,1) | (8,8) | ||
Net Equity | 20,8 | 20,5 | 25,8 | 33,6 | 39,1 | 46,6 | 55,3 | ||
Cash Flow | |||||||||
Net Profit | 4,8 | 1,7 | 5,0 | 10,8 | 9,9 | 11,7 | 13,6 | ||
Non Cash Items | 1,5 | 1,5 | 1,8 | 1,9 | 2,0 | 1,7 | 1,7 | ||
Change in NWC | (1,7) | (0,9) | (1,8) | (6,8) | (7,0) | (3,3) | (3,7) | ||
Cash Flow from Operations | 4,7 | 2,3 | 5,0 | 5,9 | 4,9 | 10,1 | 11,6 | ||
Capex | (4,7) | (2,7) | (1,0) | (3,3) | (1,7) | (2,0) | (2,0) | ||
Operating Free Cash Flow | 0,1 | (0,4) | 4,0 | 2,7 | 3,2 | 8,1 | 9,6 | ||
Dividend | (1,8) | (2,4) | (0,8) | (2,4) | (4,3) | (4,2) | (4,9) | ||
Change in Equity | 1,7 | 0,5 | 1,1 | (0,5) | (0,2) | 0,0 | 0,0 | ||
Change in Net debt | 0,0 | (2,3) | 4,3 | (0,3) | (1,3) | 4,0 | 4,7 | ||
Per Share Data | |||||||||
Current Price | 29,80 | ||||||||
Total shares out (m) | 5,4 | ||||||||
EPS | 0,90 | 0,31 | 0,93 | 2,01 | 1,83 | 2,17 | 2,52 | ||
DPS | 0,33 | 0,44 | 0,15 | 0,45 | 0,80 | 0,77 | 0,91 | ||
FCF | 0,0 | (0,4) | 0,8 | (0,1) | (0,2) | 0,7 | 0,9 | ||
Pay out ratio | 49% | 47% | 48% | 40% | 42% | 49% | 42% | ||
Ratios | |||||||||
EBITDA margin | 19,4% | 15,2% | 21,8% | 25,5% | 23,5% | 24,0% | 24,5% | ||
EBIT margin | 15,5% | 9,0% | 16,8% | 22,4% | 20,5% | 21,7% | 22,5% | ||
Net Debt/Equity | 0,4% | 11,8% | n.m. | n.m. | n.m. | n.m. | n.m. | ||
Net Debt/EBITDA | 0,0 | 0,6 | n.m. | n.m. | n.m. | n.m. | n.m. | ||
Interest cover EBIT | 11,3 | 9,0 | -138,4 | 18,5 | 136,6 | 161,8 | 187,4 | ||
ROE | 23,3% | 8,2% | 19,5% | 32,2% | 25,3% | 25,2% | 24,6% | ||
Growth Rates | |||||||||
Revenues | 12% | -26% | 55% | 54% | 7% | 12% | 12% | ||
EBITDA | 11% | -42% | 123% | 80% | -1% | 14% | 14% | ||
EBIT | 9% | -57% | 190% | 105% | -2% | 18% | 16% | ||
Net Profit | 45% | -65% | 200% | 115% | -9% | 19% | 16% |
Tuesday, October 3, 2023 6:00 PM | 2 |
Equity Research | |||||||||||||||||||||||||
UPDATE NOTE 1H23 | |||||||||||||||||||||||||
Euronext Growth Milan | |||||||||||||||||||||||||
Key financials | |||||||||||||||||||||||||
1H23A | 1H22A | 1H21A | 1H20A | 2022A | 2021A | 2020A | |||||||||||||||||||
Sales | 34.7 | 27.7 | 14.6 | 10.2 | 62.2 | 40.3 | 26.0 | ||||||||||||||||||
yoy | +25% | +89% | 44% | -34% | +54% | +55% | -26% | ||||||||||||||||||
EBITDA | 9.1 | 6.7 | 2.4 | 0.7 | 15.8 | 8.8 | 3.9 | ||||||||||||||||||
margin | 26.2% | 24.2% | 16.4% | 6.9% | 25.5% | 21.8% | 15.6% | ||||||||||||||||||
EBIT | 8.1 | 5.7 | 1.6 | (0.2) | 13.9 | 6.8 | 2.3 | ||||||||||||||||||
margin | 23.3% | 20.6% | 11.0% | n.m. | 22.4% | 16.9% | 9.5% | ||||||||||||||||||
Net Profit | 5.6 | 4.7 | 1.0 | (0.1) | 10.8 | 5.0 | 1.7 | ||||||||||||||||||
Net Capital Employed | 39.8 | 27.3 | 22.6 | 25.0 | 32.1 | 23.9 | 23.1 | ||||||||||||||||||
Net Debt (Cash) | 5.0 | (0.2) | 2.0 | 4.2 | (1.5) | (1.9) | 2.6 | ||||||||||||||||||
Equity | 34.8 | 27.5 | 20.6 | 20.9 | 33.6 | 25.8 | 20.5 | ||||||||||||||||||
Sources | 39.8 | 27.3 | 22.6 | 25.0 | 32.1 | 23.9 | 23.1 | ||||||||||||||||||
Estimate revision - Euro m | |||||||||||||||||||||||||
Euro k | 23E Old | 23E New | Var. FY23E | 24E Old | 24E New | Var. | 25E New | ||||||||||||||||||
FY24E | |||||||||||||||||||||||||
Revenues69,6
66,5
-4%
78,0
74,5
-4%
83,4
yoy | 12% | 7% | -42% | 12% | 12% | 0% | 12% |
EBITDA | 16,4 | 15,6 | -4% | 18,7 | 17,9 | -4% | 20,4 |
margin | 23,5% | 23,5% | 0% | 24,0% | 24,0% | 0% | 24,5% |
EBIT | 14,4 | 13,7 | -5% | 17,0 | 16,2 | -5% | 18,7 |
margin | 20,7% | 20,5% | -1% | 21,8% | 21,7% | 0% | 22,5% |
Net Profit | 10,4 | 9,9 | -5% | 12,3 | 11,7 | -5% | 13,6 |
yoy | -3,7% | -8,6% | 133% | 18,3% | 12,5% | -32% | 37,4% |
EPS | 1,93 |
1,83
-5%
2,29
2,17
-5%
2,52
Euro m | 23E Old | 23E New | Var. FY23E | 24E Old | 24E New | Var. | 25E New | |||||||||
FY24E | ||||||||||||||||
Net Working Capital | 24,3 |
27,7
14%
27,2
31,0
14%
34,8
Fixed net assets | 13,9 | 13,9 | 0% | 14,2 | 14,2 | 0% | 14,5 |
Funds | (2,7) | (2,7) | 0% | (2,7) | (2,7) | 0% | (2,7) |
Net Capital Employed | 35,5 | 38,9 | 10% | 38,7 | 42,5 | 10% | 46,5 |
Net Debt (Cash) | (4,1) | (0,2) | -96% | (8,9) | (4,1) | -53% | (8,8) |
Equity | 39,6 | 39,1 | -1% | 47,6 | 46,6 | -2% | 55,3 |
Sources | 35,5 |
38,9
10%
38,7
42,5
10%
46,5
Source: Group Data and PMI Capital Research Estimates
Tuesday, October 3, 2023 6:00 PM | 3 |
Equity Research | |||||||
UPDATE NOTE 1H23 | |||||||
Euronext Growth Milan | |||||||
VALUATION | |||||||
Valuation Summary | |||||||
Method | Weight | Price (Euro) | Equity Value | ||||
(Euro m) | |||||||
Multiple Comparison (FY 23-24 EV/EBITDA and P/E) | 50% | 37.65 | 203.3 | ||||
DCF | 50% | 40.68 | 219.7 | ||||
Target Price | 100% | 39.17 | 211.5 | ||||
DCF model | |||||||
DCF Valuation | |||||||
Euro m | |||||||
WACC | 8.04% | ||||||
Sum of PV 2023 -27 FCFs | 45.8 | ||||||
Discounted terminal value | 173.7 | ||||||
Enterprise Value | 219.5 | ||||||
Net Debt (FY23E) | (0.2) | ||||||
Equity Value | 219.7 | ||||||
N. of outstanding shares (m) | 5.4 | ||||||
Fair Value p.s. | 40.68 | ||||||
Multiples Comparison
Sales | EBITDA | NI | 2021A-2023E | |||||
Market | Sales | CAGR | ||||||
Companies | Country | % | ||||||
Cap | YoY | % | ||||||
2022E | 22/21 | 2022E | 2022E | Sales | EBITDA |
Tod's | Italy | 1.124 | 1.008 | 14% | 21% | 2% | 10% | 14% |
Ferragamo | Italy | 2.081 | 1.252 | 10% | 24% | 6% | 1% | -2% |
Prada | HK | 14.347 | 4.201 | 25% | 36% | 11% | 10% | 11% |
Moncler | Italy | 14.918 | 2.603 | 43% | 40% | 23% | 13% | 14% |
LVMH | US | 358.914 | 79.184 | 23% | 33% | 18% | 9% | 11% |
Kering | France | 53.264 | 20.351 | 15% | 35% | 18% | 4% | 4% |
Burberry | France | 8.048 | 3.509 | 5% | 31% | 15% | 6% | 3% |
Richemont | Swizerland | 60.216 | 19.664 | 3% | 32% | 4% | 7% | 7% |
Average | 64.114 | 16.472 | 17% | 31% | 12% | 8% | 8% | |
FOPE | ITA | 161 | 62 | 54% | 25% | 17% | 9% | 6% |
Source: FactSet data as of October 2nd, 2023 and PMI Capital estimates for FOPE
Companies | EV/EBITDA | |||||||
22A | 23E | 24E | ||||||
P/E
22A 23E 24E
Tod's | 7,5 | 6,9 | 6,3 | 48,9 | 24,0 | 18,4 |
Ferragamo | n.a. | n.a. | n.a. | 29,6 | 62,1 | 35,9 |
Prada | 9,9 | 9,4 | 8,6 | 30,2 | 21,9 | 19,4 |
Moncler | 12,7 | 12,3 | 11,0 | 25,4 | 23,7 | 21,1 |
LVMH | 14,2 | 13,4 | 12,3 | 25,5 | 21,9 | 20,2 |
Kering | 9,4 | 8,7 | 8,1 | 14,1 | 14,5 | 13,2 |
Burberry | 10,7 | 8,0 | 7,5 | 15,5 | 16,2 | 14,4 |
Richemont | 13,6 | 13,4 | 12,5 | 16,9 | 16,0 | 14,8 |
Average | 11,1 | 10,3 | 9,5 | 25,8 | 25,0 | 19,7 |
FOPE | 10,1 | 10,2 | 8,9 | 14,9 | 16,3 | 13,7 |
Premium/Discount to Peers | -10% | -1% | -6% | -42% | -35% | -30% |
Source: FactSet data as of October 2nd, 2023 and PMI Capital estimates for FOPE
Tuesday, October 3, 2023 6:00 PM | 4 |
Equity Research
UPDATE NOTE 1H23
Euronext Growth Milan
INDUSTRY COMPARISON
FOPE Spa (FPE-IT): PMI Capital Research estimates and Factset Data
EGM Sector: average data for listed on EGM included in the Consumer Durables sub sector: Askoll EVA (EVA- IT), Estrima (BIRO-IT), GIBUS (GIBUS-IT), Gismondi 1754 (GIS-IT), Illa (ILLA-IT), Imprendiroma (IMP-IT), Pozzi Milano (POZ-IT), Radici (RAD-IT).
Industry Peers: average data for a selected group of listed peers (European luxury brands): Tod's (TOD- IT), Ferragamo (SFER-IT), Prada (1913-HK), Moncler (MONC-IT). LVMH (MC-FR), Kering (KER-FR), Burberry (BRBY- GB), Richemont (CFR-CH).
Euronext Growth Milan: average financial and market data for all the companies listed on EGM, reported price performance data are related to the FTSE Italia Index.
25/04/2023 | Consumer | |||
FOPE | Durables | Peers Avg | FTSE Italia Growth | |
EGM | ||||
Key Financials FY22 | ||||
Revenues | 62,2 | 37,9 | 16.515 | 37,1 |
EBITDA | 15,5 | 4,8 | 5.564 | 6,2 |
EBITDA % | 24,9% | 12,7% | 33,7% | 16,7% |
EBIT | 13,9 | 3,5 | 4.275 | 2,7 |
EBIT % | 22,3% | 9,1% | 25,9% | 7,4% |
Earnings | 10,8 | 2,1 | 2.934 | 1,7 |
Earnings % | 17,4% | 5,4% | 17,8% | 4,5% |
Net Debt | (1,5) | 7,7 | 259 | 3,9 |
ND/EBITDA | (0,1) | 1,6 | 0,0 | 0,6 |
FY21-23 Revenues CAGR | 28% | 18% | 14% | 26% |
FY22-24 Revenues CAGR | 9% | 18% | 8% | 17% |
FY21-23 Earnings CAGR | 41% | 16% | 18% | 57% |
FY22-24 Earnings CAGR | 4% | 21% | 10% | 49% |
Market Data | ||||
Market Cap | 161 | 51 | 64.114 | 39 |
EV | 166 | 53 | 70.067 | 44 |
Free Float | 13% | 26% | 54% | 34% |
ADTT YTD (Eu k) | 242 | 31 | 82.538 | 46 |
Market Multiples | ||||
EV/Sales 2022 | 2,7 | 1,0 | 3,3 | 1,6 |
EV/Sales 2023 | 2,5 | 0,9 | 3,3 | 1,3 |
EV/Sales 2024 | 18,9 | 0,7 | 3,1 | 1,3 |
EV/EBITDA 2022 | 10,1 | 8,1 | 11,1 | 17,2 |
EV/EBITDA 2023 | 10,2 | 7,2 | 10,3 | 9,6 |
EV/EBITDA 2024 | 8,9 | 6,7 | 9,5 | 6,5 |
EV/EBIT 2022 | 11,9 | 14,1 | 17,7 | 27,9 |
EV/EBIT 2023 | 12,1 | 10,0 | 15,1 | 13,6 |
EV/EBIT 2024 | 10,2 | 8,2 | 13,5 | 15,3 |
P/E 2022 | 14,9 | 39,8 | 25,8 | 35,1 |
P/E 2023 | 16,3 | 16,1 | 25,0 | 21,8 |
P/E 2024 | 13,7 | 12,8 | 19,7 | 19,7 |
Earnings Yield | 6,5% | 2,5% | 3,9% | 2,9% |
Stock Performance | ||||
1D | 0,0% | 2,3% | -1% | -1,1% |
1W | -3,2% | -2,2% | -5% | -3,3% |
1M | -6,9% | -14,8% | -12% | -7,4% |
3M | -6,9% | -25,1% | -16% | -9,3% |
6M | -10,2% | -28,9% | -20% | -12,3% |
YTD | 26,8% | -35,0% | -2% | 1,0% |
1Y | 19,2% | -20,9% | 7% | -6,7% |
Source: PMI Capital Research and FactSet data as of October 2n, 2023
Tuesday, October 3, 2023 6:00 PM | 5 |
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Fope S.p.A. published this content on 04 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 October 2023 12:47:13 UTC.