Rosetti Marino : April 28, 2023 Intesa Sanpaolo Equity Company Note

Equity

Company Note

Rosetti Marino

FY22 Results

We appreciate that after the weak results reported in FY20 and FY21 the company was able to return to profit, confirming the positive trend already seen in 1H22, mainly thanks to the Energy business, on which the company is focusing to boost growth from FY23 onwards (and expects to gather further large-sized orders), also after the sale of one of its three shipyards.

FY22 results

Results outperformed our estimates from the EBITDA level. The key points were: i) total revenues of EUR 316.5M (vs. EUR 330M in our projections), almost doubling vs. FY21 turnover. EUR 297M came from the Energy sector (vs. EUR 139M in FY21), despite the downsizing of the scope related to the order destined to Russia; the Naval sector recorded a decrease from EUR 22M in FY21 to EUR 19M; ii) EBITDA was EUR 30.1M vs. EUR -56.6M in FY21; iii) net result was a EUR 4.6M profit (EUR 0.7M in our projections) vs. a EUR 54.7M net loss in FY21; and iv) the (short-term) net cash position stood at EUR 35.4M vs. EUR 83.2M at YE21.

Outlook and estimates

The Energy business is going to represent the main driver in FY23 as well, and we recall that Rosetti Marino recently sold one of its three owned yards to better focus its resources on Energy and Carbon Neutrality market, on which they are gathering several requests. The order backlog at 31 December 2022 was EUR 307M (vs. EUR 469M as at YE21), with the Energy division order backlog amounting to EUR 298M (vs. EUR 431M at YE21). The company recently collected an EUR 75M order, driving the order backlog to EUR 373M. It also disclosed that it expects to collect further orders shortly (over EUR 400M). The order backlog of shipbuilding activities amounted to EUR 9M (vs. EUR 38M at YE21).

Valuation

In view of Rosetti Marino's stable shareholding structure and limited trading volumes, we do not assign a rating or target price to the company.

MID CORPORATE

28 April 2023: 12:12 CET

Date and time of production

No Rating

Italy/Oil Equipment & Services Results

EGM

Price Performance

(RIC: YRM.MI, BB: YRM IM)

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A M J J A S O N D J F M A

Rosetti Marino FTSE IT All Sh - PRICE INDEX

Rosetti Marino - Key Data

Price date (market close)	27/04/2023
Market price (EUR)			34.00
Market cap (EUR M)			136.00
52Wk range (EUR)		34.8/33.2
Price performance %	1M	3M	12M
Absolute	2.4	2.4	-2.3
Rel. to FTSE IT All Sh	-1.0	0.0	-13.2

Y/E Dec (EUR M)	FY22A	FY23E	FY24E
Revenues	316.5	455.0	470.0
EBITDA	30.07	21.00	32.00
EBIT	18.75	14.00	24.60
Net income	4.64	8.05	15.47
EPS (EUR)	1.16	2.01	3.87
Net debt/-cash	-35.41-45.55-61.37
Adj P/E (x)	29.8	16.9	8.8
EV/EBITDA (x)	3.6	4.3	2.3
EV/EBIT (x)	5.8	6.5	3.0
Div ord yield (%)	0	0	0

Source: Company data, FactSet and Intesa Sanpaolo Research estimates

Intesa Sanpaolo Research Dept.

Arianna Terazzi - Research Analyst

[e-mail]

Corporate Broking Research

A. Francese, G. Berti, G. Cabrino

D. Rimini, A. Terazzi

See page 8 for full disclosure and analyst certification	28 April 2023: 12:30 CET
Intesa Sanpaolo is Specialist to Rosetti Marino
	Date and time of first circulation

Rosetti Marino	28 April 2023

FY22 Results

Results outperformed our estimates from the EBITDA level. The key points were:

• Total revenues of EUR 316.5M (vs. EUR 330M in our projections), almost doubling vs. FY21 turnover. The performance was driven by the Energy sector (EUR 297M vs. EUR 139M in FY21), despite the downsizing of the scope related to the order destined to Russia (EUR -56M vs. the amount originally set); the Naval sector recorded a decrease from EUR 22M in FY21 to EUR 19M;
• EBITDA was EUR 30.1M vs. EUR -56.6M in FY21. According to the company, the Energy sector experienced a strong recovery in margins, while the Naval sector's profitability reported heavy losses that continued to erode financial resources;
• Net result was a EUR 4.6M profit (EUR 0.7M in our projections) vs. a EUR 54.7M net loss in FY21;
• The (short-term) net cash position stood at EUR 35.4M vs. EUR 83.2M at YE21.

Rosetti Marino - FY22 results

E U R M	2H21A	2H22A	yoy %	FY21A	FY22A	yoy %	FY22E	A/E %
Turnover	88.9	165.5	86.1	161.2	316.5	96.3	330	-4.1
EBITDA	-22.9	24.0	NM	-56.6	30.1	NM	9	NM
EBITDA margin (%)	Neg.	14.5		Neg.	9.5		3.1
EBIT	-27.0	16.2	NM	-64.8	18.7	NM	1.2	NM
EBIT margin (%)	Neg.	9.8		Neg.	5.9		0.4
Net profit	-26.0	3.5	NM	-54.7	4.6	NM	0.7	NM

NM: not meaningful; A: actual; E: estimates; Source: Company data and Intesa Sanpaolo Research

2	Intesa Sanpaolo Research Department

Rosetti Marino	28 April 2023

Recent Events and Outlook

Last March, Rosetti Marino announced the sale of the San Vitale shipyard, one of its	Sale of San Vitale shipyard
three owned yards, located in the Port of Ravenna, to a leading operator in the
shipbuilding sector. The sale was closed at approx. EUR 40M, according to the press
release. The transaction is aimed at focusing resources on Energy and Carbon
Neutrality market (The Energy sector represents approx. 92% of the company's value of
production), on which Rosetti Marino is gathering several requests, according to the
company.

Indeed, the order backlog was EUR 307M (vs. EUR 544M as at YE21) and reflects a buoyant Energy market:

• The Energy division order backlog amounted to EUR 298M (vs. EUR 431M at YE21), still not incorporating orders related to some tenders, which would be awarded in 1H23. The company received an EUR 75M order in 1Q23, leading to an EUR 373M order backlog, and should also collect two further contracts for over EUR 400M, bringing the consolidated order backlog up to EUR 773M, according to the company, which would affect results from FY23 onwards;
• The order backlog of shipbuilding activities amounted to EUR 9M (vs. EUR 38M at YE21), and underperformed company's expectations. During 2023, no further order intake is expected (no commercial activity is planned).

2023E-25E estimates

We revise our FY23E estimates, embedding a solid performance in the Energy market and the weak results of the Naval sector. We now see: i) EUR 455M revenues; ii) EUR 21M EBITDA; iii) EUR 8.1M net profit; iv) EUR 45.6M net cash, including EUR 30M net cash-in we estimate from the sale of the San Vitale shipyard.

On the back of the solid order backlog with reference to the Energy sector, and a positive outlook in terms of orders acquisition in the same field:

• For FY24E we now project: i) EUR 470M revenues (+4.4% vs. previously); ii) EBITDA margin at 6.8% leading to EUR 32M EBITDA; iii) EUR 15.5M net profit; v) EUR 61.4M net cash;
• For FY25E, based on the same drivers as for FY24E, we see: i) EUR 500M revenues (+6.4% yoy); ii) EUR 38M EBITDA; iii) EUR 19.1M net income; iv) EUR 80.8M net cash.

Rosetti Marino - FY23E-25E estimates revision

Solid order backlog, with Energy division representing 98% of total

EUR M	2023E Old	2023E New	chg %	2024E Old	2024E New	chg %	2025E New	vs. FY24E %
Revenues	460	455.0	-1.1	450	470.0	4.4	500.0	6.4
EBITDA	27.5	21.0	-23.6	27	32.0	18.5	38.0	18.8
EBITDA margin (%)	6	4.6		6	6.8		7.6
EBIT	19.7	14.0	-28.9	19.2	24.6	28.1	30.2	22.8
Net profit	13.7	8.1	-41.2	13.4	15.5	15.4	19.1	23.5
Net debt (- cash)	-53.6	-45.6	-15.0	-65.5	-61.4	-6.3	-80.8	31.6

E: estimates; Source: Intesa Sanpaolo Research

We highlight that the company operates in some markets (e.g. Kazakhstan) characterised by social instability, which could lead to possible negative effects on financials.

Intesa Sanpaolo Research Department

3

Rosetti Marino	28 April 2023

Valuation

We based our valuation of Rosetti Marino on a multiples' comparison and DCF model.

Multiples comparison

In our multiples' comparison, we identified a sample of comparable companies as shown in the following tables.

We highlight that the profitability of Rosetti Marino, in terms of EBIT margin and net income margin, is below the peers' average in FY23E-24E. If looking at the peers' median, Rosetti Marino is below in terms of FY23E EBIT margin but slightly higher in terms of FY24E EBIT margin and FY23E-24E net income margin.

Rosetti Marino - Margin comparison (2023E-24E)

	EUR M, %	Mkt cap	EBIT margin	EBIT margin	Net income	Net income
		(EUR M)**	FY23E %	FY24E %	margin FY23E %	margin FY24E %
Tenaris SA	14,981	27.3	23.7	22.4	20.2
Tecnicas	674	3.6	3.8	2.0	2.2
Reunidas SA	386	2.4	4.7	-1.4	1.5
Petrofac
Average		11.1	10.7	7.7	7.9
Rosetti Marino*	136.0	3.1	5.2	1.8	3.3

Source: Note: (**) data priced at market close on 27/04/2023. Source: FactSet and (*) Intesa Sanpaolo Research

In terms of FY23E EV/EBIT, the multiples of the selected companies are between 3.6- 14.5x, with an average of 7.3x, while the FY24E EV/EBIT multiples are between 2.8-5.6x, with an average of 4.0x.

Regarding the FY23E P/E, the peers' multiples are within a 5.0-6.3x range, with an average of 5.6x, while the FY24E P/E multiples are between 5.8-8.9x, with an average of 6.9x.

Rosetti Marino - Multiples Comparison (2023E-24E)

x	Price (EUR)**	EV/EBIT	EV/EBIT	P/E FY23E	P/E FY24E
			FY23E	FY24E
Tenaris	21.7	3.6	3.7	5.0	5.9
Tecnicas Reunidas	8.3	3.7	2.8	6.3	5.8
Petrofac	0.7	14.5	5.6	NA	8.9
Average		7.3	4.0	5.6	6.9
Rosetti Marino*	34.0	6.5	3.0	16.9	8.8

Note: (**) data priced at market close on 27/04/2023; Source: FactSet and (*) Intesa Sanpaolo Research

Applying the EV/EBIT average to Rosetti Marino's FY23E/24E estimates, we obtain equity values of EUR 147.8M and EUR 159.8M.

Rosetti Marino - Multiples comparison results

EUR M	2023E	2024E
EBIT	14.0	24.6
EV/EBIT avg (x)	7.3	4.0
EV	102.2	98.4
Net debt/-cash	-45.6	-61.4
Equity value	147.8	159.8

Source: Source: FactSet and Intesa Sanpaolo Research estimates

4	Intesa Sanpaolo Research Department

Rosetti Marino	28 April 2023

Nevertheless, in view of Rosetti Marino's stable shareholding structure and limited trading volumes, we do not assign a rating or target price to the company.

DCF model

We also ran a valuation on a DCF model, which points to an equity value range of EUR 120.7M to EUR 152.7M, in order to better reflect the company's specific long-term prospects.

Our key DCF assumptions are:

• Explicit forecasts through 2025E;
• An equity risk premium at 6.5%;
• A risk-free rate at 4% (3% previously);
• A gearing ratio (D/invested capital) of 0.0%;
• We derived a WACC at 10.5%.

To calculate the terminal value, we used two approaches:

• We discount to perpetuity the 2025E FCFO at a WACC of 10.5%;
• We discount to perpetuity the EBIT mid-cycle2010A-25E, excluding 2020A and 2021A that we deem as extraordinary, at a WACC of 10.5%.

Intesa Sanpaolo Research Department

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