Rosetti Marino : October 27, 2022 Intesa San Paolo Equity Company Note

Equity

Company Note

Rosetti Marino

1H22 Results

1H22 results showed a robust increase in the production activity, which was nearly +110% yoy, mainly driven by the Energy sector and allowing the company to report a positive bottom line. We reduce our expectations on FY22E, mainly due to the reduction of the scope of a project in Russia. However, given the still solid order backlog, for now we confirm our FY23E-24E estimates.

1H22 results

The negative impact from the higher cost of raw materials and operational difficulties related to international sanctions was more than offset by the positive outcome from the strong recovery of the Energy sector, which has been further supported since the beginning of the war. This recovery allowed the company to return to positive results already in 1H22, when the company recorded: i) EUR 151M vs. EUR 72.3M in 1H21A (+108.8%); ii) EUR 6.1M EBITDA vs. an EUR -33.8M EBITDA in 1H21A; and iii) net profit of EUR 1.1M vs. an EUR 28.7M net loss in 1H21A.

Outlook and estimates revision

We appreciate the solid order backlog as at 30 June 2022 (EUR 452M), even if lower vs. YE21 (EUR 544M) and mainly driven by the Energy sector: i) EUR 379M in the Energy sector (vs. EUR 466M at YE21); ii) EUR 20M related to shipbuilding activities (vs. EUR 38M at YE21); and iii) EUR 53M regarding Process Plants (vs. EUR 40M at YE21). However, we cut our FY22E top line by EUR 60M, mainly to reflect the impact of the contract in Russia. Net profit should come in at approx. break-even in FY22E thanks to the implementation of projects with higher margins, mainly with reference to the Energy division. For now, we confirm our FY23E-24E estimates. 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.

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

27 October 2022: 12:50 CET

Date and time of production

No Rating

Italy/Oil Equipment & Services Results

EGM (ex-AIM)

Price Performance

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

105
100
95
90
85
80
75
70
O N D J F M A M J J A S O

Rosetti Marino FTSE IT All Sh - PRICE INDEX

Rosetti Marino - Key Data

Price date (market close)	26/10/2022
Market price (EUR)				34.00
Market cap (EUR M)			136.00
52Wk range (EUR)			36.8/34.0
Price performance % 1M	3M	12M
Absolute		0.0	0.0	-7.6
Rel. to FTSE IT All Sh	-5.5	-4.6	12.4
Y/E Dec (EUR M)	FY21A	FY22E	FY23E
Revenues	161.2		330.0	460.0
EBITDA	-56.64		9.00	27.50
EBIT	-64.81		1.20	19.70
Net income	-54.73		0.65	13.74
EPS (EUR)	-13.68		0.16	3.44
Net debt/-cash	-83.24	-39.42	-53.56
Adj P/E (x)	Neg.		NM	9.9
EV/EBITDA (x)	Neg.		10.6	3.0
EV/EBIT (x)	Neg.		79.8	4.1
Div ord yield (%)	0		0	0

Source: Company data, FactSet and Intesa Sanpaolo Research estimates

Intesa Sanpaolo Research Dept.

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

Corporate Broking Research

A. Francese, G. Berti, G. Cabrino M. Cristofori, Y. El Alaoui, A. Terazzi

See page 8 for full disclosure and analyst certification	27 October 2022: 13:00 CET
Intesa Sanpaolo is Specialist to Rosetti Marino
	Date and time of first circulation

Rosetti Marino	27 October 2022

1H22 Results

The key points of results were:

• Total revenues of EUR 151M vs. EUR 72.3M in 1H21A (+108.8%):
• • The Energy segment recorded an outstanding growth, resulting in EUR 133M revenues vs. EUR 52M in 1H21A;
  • Shipbuilding activities were EUR 7M vs. EUR 9M of 1H21A, suffering from low orders, mainly due to the ongoing Russia-Ukraine conflict; and
  • The Process Plants segment' top line was EUR 11M (in line with 1H21A), and was negatively impacted by the suspension of a project destined to Russia;
• EBITDA was EUR 6.1M vs. an EUR -33.8M EBITDA in 1H21A; the higher cost of raw materials and operational difficulties related to international sanctions were more than offset by the positive outcome from the strong recovery of the Energy sector;
• Net profit came in at EUR 1.1M vs. an EUR 28.7M net loss in 1H21A;
• The short-termnet cash position was EUR 63.8M vs. EUR 83.2M at YE21A.

Rosetti Marino - 1H22 results

	EUR M	1H21A	1H22A	yoy %
	Turnover	72.3	151.0	108.8
	EBITDA	-33.8	6.1	NM
	EBITDA margin (%)	Neg.	4.0
	EBIT	-37.9	2.5	NM
	EBIT margin (%)	Neg.	1.7
	Net profit	-28.7	1.1	NM

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

2	Intesa Sanpaolo Research Department

Rosetti Marino	27 October 2022

Earnings Outlook

The order backlog as at 30 June 2022 (EUR 452M), albeit lower vs. YE21 (EUR 544M), is still solid and reflects the mixed outlook of Rosetti Marino's divisions:

Order backlog and outlook mixed for the 3 divisions

• EUR 379M in the Energy sector (vs. EUR 466M at YE21);
• EUR 20M related to shipbuilding activities (vs. EUR 38M at YE21);
• EUR 53M regarding Process Plants (vs. EUR 40M at YE21). New orders for EUR 32M were acquired in 1H22.

Indeed, the outlook seems positive for the Energy sector and the Process plants division. The companies of the group that work in this segment have been participating in tenders that should shortly reach the award phase; therefore, activity is expected to grow significantly, boosted by a good commercial activity, despite the expected drop in volumes for the Russian Project (worth EUR 201M), whose perimeter was recently amended and whose activities ended in September 2022, earlier than originally planned.

Instead, with reference to shipbuilding activities, in contrast with what was anticipated in March, the company stated that there are no significant signs of market recovery that would make it possible to overcome the difficult period of FY20-21. In 1H22, no orders were collected by the subsidiary Rosetti Superyachts Spa and the company sees limited opportunities in the short term to acquire new orders, which should translate in a negative result for the division at YE22.

2022E-24E estimates

We cut our FY22E top line by EUR 60M, mainly to reflect the impact of the contract in Russia, but we assume net profit still approx. at break-even thanks to the implementation of projects with higher margins, mainly with reference to the Energy division.

For now, we confirm our FY23E-24E estimates (only adjusting net cash due to the changes in our FY22E figures).

Rosetti Marino - 2022E-24E estimates revision

	EUR M	2022E Old	2022E New	chg %	2023E	vs. 2022E %	2024E	vs. 2023E %
	Revenues	390.0	330.0	-15.4	460.0	39.4	450.0	-2.2
	EBITDA	10.5	9.0	-14.3	27.5	NM	27.0	-1.8
	EBITDA margin (%)	2.7	3.1		6.0		6.0
	EBIT	2.7	1.2	-55.6	19.7	NM	19.2	-2.5
	Net profit	1.4	0.7	-53.6	13.7	NM	13.4	-2.5
	Net debt (- cash)	-41.4	-38.6	-6.7	-53.6	38.7	-65.5	22.4

NM: not meaningful; 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	27 October 2022

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 FY22E-24E.

Rosetti Marino - margin comparison (2022E-24E)

	EUR M, %	Mkt cap	EBIT margin	EBIT margin	EBIT margin	Net income margin	Net income margin	Net income margin
		(EUR	FY22E %	FY23E %	FY24E %	FY22E %	FY23E %	FY24E %
		M)**
	Tenaris SA	18,163	23.4	23.2	20.0	21.0	20.0	17.7
	Tecnicas	376	2.2	2.8	3.0	-0.5	1.5	1.7
	Reunidas SA	655	2.3	3.9	5.3	-0.5	1.2	3.0
	Petrofac
	National Oilwell	8,772	4.8	7.6	9.5	3.1	5.0	6.6
	Varco		8.1	9.4	9.4	5.8	6.9	7.2
	Average
	Rosetti Marino*	136.0	0.4	4.3	4.3	0.2	3.0	3.0

Source: Note: (**) data priced at market close on 26.10.2022. Source: FactSet and (*) Intesa Sanpaolo Research

In terms of FY23E EV/EBIT, the multiples of the selected companies are between 2.9- 14.7x, with a median of 6.5x, while the FY24E EV/EBIT multiples are between 3.5-12.0x, with a median of 6.5x.

Regarding the FY23E P/E, the peers' multiples are within a 5.6-21.9x range, with a median of 14.2x, while the FY24E P/E multiples are between 4.5-15.6x, with a median of 7.4x.

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

	x	Price (EUR)**	EV/EBIT	EV/EBIT	P/E FY23E	P/E FY24E
			FY23E	FY24E
	Tenaris	15.4	5.4	7.5	7.8	8.7
	Tecnicas Reunidas	6.7	2.9	3.5	5.6	4.5
	Petrofac	1.3	7.6	5.4	20.7	6.1
	National Oilwell Varco	22.3	14.7	12.0	21.9	15.6
	Median		6.5	6.5	14.2	7.4
	Rosetti Marino*	34.0	4.1	3.6	9.9	10.2

Note: (**) data priced at market close on 26.10.2022; Source: FactSet and (*) Intesa Sanpaolo Research

Applying the EV/EBIT median to Rosetti Marino's FY23E/24E estimates, we obtain equity values of EUR 181.9M and EUR 189.7M.

Rosetti Marino - Multiples comparison results

	EUR M	2023E	2024E
	EBIT	19.7	19.2
	Median EV/EBIT	6.5	6.5
	EV	128.4	124.2
	Net debt/-cash	-53.6	-65.5
	Equity value	181.9	189.7

Source: Source: FactSet and Intesa Sanpaolo Research estimates

4	Intesa Sanpaolo Research Department

Rosetti Marino	27 October 2022

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 111M to EUR 136.5M, in order to better reflect the company's specific long-term prospects.

Our key DCF assumptions are:

• Explicit forecasts through 2024E;
• An equity risk premium at 6.5% (6.25% previously);
• A risk-free rate at 3% (1.75% previously);
• A gearing ratio (D/invested capital) of 0.0%;
• We derived a WACC at 9.5%.

To calculate the terminal value, we used two approaches:

• We discount to perpetuity the 2023E FCFO at a WACC of 9.5%;
• We discount to perpetuity the EBIT mid-cycle2010A-24E, excluding 2020A and 2021A that we deem as extraordinary, at a WACC of 9.5%.

Intesa Sanpaolo Research Department

5