Rosetti Marino : October 15, 2020 Banca IMI Equity Company Note

		Equity
Company Note		MID CORPORATE
Rosetti Marino
Date and time of production
	15 October 2020: 8:02 CET

1H20 Results

No Rating

The lockdown, with different timings and durations in Italy and abroad, affected the company's production and commercial activity, leading to revenues down by 32.4% yoy and a contained order intake in 1H20. Despite some signs of a recovery, commercial activity is still reduced and the outlook is uncertain.

1H20 results

The key take-aways from 1H20 results were: i) total revenues at EUR 111.5M vs. EUR 164.9M in 1H19A (-32.4% yoy). The Energy Segment recorded a marked drop (EUR 92M vs. EUR 143M in 1H19A); ii) EBITDA was negative for EUR 14.9M vs. a positive EUR 21.7M in 1H19A; iii) the net loss came in at EUR 17.1M vs. EUR 2.1M net profit in 1H19A; iv) the short- term net cash position was EUR 85.4M vs. EUR 120M at YE19A. The order backlog at 30 June amounted to EUR 165M (vs. EUR 246M at YE19), o/w EUR 111M in the Energy Segment, EUR 28M related to the shipbuilding activities, and EUR 26M to the Process Plants segment.

Outlook and estimates revision

Overall, given the low level of order backlog in the company's three business areas and the uncertainties in the reference markets, we revise downwards our estimates over our forecast period, as follows: i) for 2020E, we cut our revenue projections by 36%, and we now forecast a negative EBITDA (EUR -11.6M) and a reduction in net cash by 29.8%; ii) for 2021E, we cut our top/line estimate by around 19% and we now look for a positive EUR 7.1M EBITDA and net profit broadly at breakeven. In 2022E and 2023E, we see a yoy increase in turnover of around 21% and 7%, respectively, and an EBITDA margin increasing over the two-year period (at 3% in 2022E, 5.1% in 2023E), but still below the company's 2014-2019 average (around 7.3%). We highlight that any further unpredictable development of Covid-19 could undermine the feasibility of these estimates.

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.

Italy/Oil Equipment & Services Update

AIM

Price Performance

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

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Rosetti Marino FTSE IT All Sh - PRICE INDEX

Rosetti Marino - Key Data

Price date (market close)		13/10/2020
Market price (EUR)				35.20
Market cap (EUR M)			140.80
52Wk range (EUR)			40.8/35.2
Price performance % 1M	3M	12M
Absolute	-2.2	-2.2	-11.1
Rel. to FTSE IT All Sh	-0.9	-0.4	0.2
Y/E Dec (EUR M)	FY19A	FY20E	FY21E
Revenues	338.6		254.0	358.0
EBITDA	33.38	-11.60	7.10
EBIT	25.23	-18.70	-0.30
Net income	4.46	-15.99	0.30
EPS (EUR)	1.12		-4.00	0.08
Net debt/-cash	-120.2	-58.68	-56.10
Adj P/E (x)	35.8		Neg.	NM
EV/EBITDA (x)	18.9		Neg.	12.6
EV/EBIT (x)	24.9		Neg.	NM
Div ord yield (%)	1.2		1.3	1.3

Source: Company data, FactSet and Intesa Sanpaolo Research estimates

Intesa Sanpaolo Research Dept.

Gabriele Berti - Research Analyst [phone] [e-mail]

Arianna Terazzi - Research Analyst [phone] [e-mail]

Corporate Broking Research

Alberto Francese, Gabriele Berti

Arianna Terazzi

See page 9 for full disclosure and analyst certification	15 October 2020: 08:04 CET
Intesa Sanpaolo is Specialist to Rosetti Marino
	Date and time of first circulation

Rosetti Marino	15 October 2020

Contents

1H20 Results	3
Outlook and estimates revision	4
Estimates revision	4
Valuation	5
Company Snapshot	8

2	Intesa Sanpaolo Research Department

Rosetti Marino	15 October 2020

1H20 Results

Rosetti Marino's 1H20 results were heavily impacted by Covid-19 pandemic. The key points of the results were:

• Total revenues of EUR 111.5M vs. EUR 165M in 1H19A (-32.4% yoy). This decrease in production was mainly caused by the lockdown that almost reduced to zero the operativity of the Italian companies for more than two months and, with different timings and durations, also abroad. In particular:
• • The Energy segment posted revenues of EUR 92M vs. EUR 143M in 1H19A;
  • Shipbuilding activities' revenues rose to EUR 4M vs. EUR 2M of 1H19A;
  • The Process Plants segment posted revenues of EUR 16M (vs. EUR 20M of 1H19A).
• EBITDA was negative for EUR 14.9M vs. a positive EUR 21.7M EBITDA in 1H19A; despite cost cutting initiatives, the margin was affected by the increased weighting on revenues of service costs (60.3% vs. 38.5% in 1H19) and labour costs (26.9% vs. 19.9% in 1H19);
• Net loss came in at EUR 17.1M vs. a EUR 2.1M net profit in 1H19A.

The short-term net cash position was EUR 85.4M vs. EUR 120M at YE19A.

Rosetti Marino - 1H20A results

	EUR M	1H19A	1H20A	yoy %
	Turnover	164.9	111.5	-32.4
	EBITDA	21.7	-14.9	NM
	EBITDA margin (%)	13.1	NM
	EBIT	11.5	-18.3	NM
	EBIT margin (%)	7	NM
	Net profit	2.1	-17.1	NM

NM: not meaningful; A: actual; Source: Company data

The order backlog at 30 June amounted to EUR 165M (vs. EUR 246M at YE19), o/w EUR 111M in the Energy Segment, EUR 28M related to the Shipbuilding Activities, and EUR 26M to the Process Plants segment. The order acquisition in 1H20 amounted to just EUR 33M, due to the combined effect of both investment delays and cancellations (particularly in the Energy Segment) and impacted the whole group.

No cancellation of activities was seen abroad although no new contracts were signed in Kazakhstan, Nigeria and UAE.

Intesa Sanpaolo Research Department

3

Rosetti Marino	15 October 2020

Outlook and Estimates Revision

Low oil prices and the Covid19 pandemic impact are reducing capex volumes of oil companies and thus lowering demand for energy plants. However, in contrast with the cancellation of 2 gas platforms in the UK and a 6 months delay of another platform in the North Sea, we appreciate the company's indications that it is collecting a seizeable number of requests for new projects and the fact that, in 2021, new tender procedures should enter the award phase.

According to management, overall there are encouraging signs of recovery in some countries overlooking the Mediterranean Sea and the Arabian Gulf as well as positive feedback from the Russian market, but operativity is subject to the duration and the geographic spread of the health emergency.

On the other hand, management indicated that shipbuilding activities (2% and 3.6% of business turnover in FY19 and 1H20, respectively) are expected to continue with no particular issues.

Estimates revision

Overall, given the low level of order backlog in the company's three business areas and the uncertainties in the reference markets, we revise downwards our estimates over our forecast period, extending our projections to FY22 and FY23. In detail:

• For 2020E, we cut our revenues projections by around 36%, and we now assume a negative EBITDA (EUR -11.6M) and a reduction in net cash by 29.8%;
• For 2021E, we reduced by around 19% our top line assumption, now looking for a EUR 7.1M positive EBITDA and net profit broadly at breakeven;
• For 2022E and 2023E, we projected a yoy turnover increase of around 21% and 7%, respectively, and an EBITDA margin increasing in the two-year period (3% in 2022E, 5.1% in 2023), but still at a lower level vs. the company's 2014-2019 average (around 7.3%).

We highlight that any further unpredictable development of Covid19 could undermine the feasibility of these estimates.

Rosetti Marino - Estimates revision (2020E-23E)

	EUR M		2020E			2021E		2022E		2023E
		Old		chg. %	Old		chg. %		yoy %		yoy %
		New	New	New	New
	Revenues	398.5	254.0	-36.3	440.4	358.0	-18.7	434.0	21.2	465.0	7.1
	EBITDA	14.7	-11.6	NM	20.4	7.1	-65.1	13.2	85.9	23.5	78.0
	EBITDA margin (%)	3.7	NM		4.6	2.0		3.0		5.1
	EBIT	8.6	-18.7	NM	14.2	-0.3	NM	5.8	NM	16.1	176.7
	Net profit	3.1	-16.0	NM	7.0	0.3	-95.7	4.0	NM	10.9	171.3
	Net debt (- cash)	-85.0	-58.7	-30.9	-87.2	-56.1	-35.7	-58.6	4.5	-66.3	13.0

NM: not meaningful; E: estimates; Source: Intesa Sanpaolo Research

4	Intesa Sanpaolo Research Department