1H23: ANCORA RISULTATI SOLIDI (ENG)

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

[e-mail]

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