Neodecortech S p A : H1 2023_MidCap

EQUITY RESEARCH

NEODECORTECH

RESULTS REVIEW

Press release

H1-2023: Normalisation

H1 was in line with expectations. The decline in revenue can be attributed to the normalisation of prices and volumes after two record years. BEG's operations have been affected by the continued cessation of energy incentives (Maximisation). H2 is expected to land in line with H1.

Yesterday, Neodecortech released its H1 results, landing in line with expectations. Revenue amounted to around €86m (vs. €85m expected), down 13% (-14% expected). This result should be read in the light of three factors:

1. Price normalisation - After a record year in 2022, whose performance benefited from record energy prices (2022 average of €0.300/kWh, +140% vs. 2021) and a general rise in sales prices, a normalisation can be observed for 2023. In addition, the gradual reduction in input costs (resin -9.6% yoy in Q2, wood pulp -1.4% yoy source: Fred) has forced the group to reduce its selling prices.
2. Falling demand - The Covid effect is now behind us, and market demand is normalising. To illustrate this, retail furniture sales in Q2-23 were down 3% on Q1-23 (source: Istat).
3. BEG incentives - The Maximisation Regime (reintegration of revenues provided by the Italian state to energy producers) was interrupted from 1 April to 15 May, forcing the group to close the plant during this period. This interruption resulted

in a lower contribution in terms of revenue. In addition, due to a high 2022 energy price (PUN), the group has not benefited (and will not benefit in 2023) from the contribution from energy incentives.

The EBITDA margin came in at 10.7%, but this was inflated by €2.6m of other non- recurring revenues, relating to the reintegration of revenues from the maximisation accruing in the FY2022. Without this non-recurring item, the EBITDA margin would be around 8% (in line with our estimate). Net debt stood at €32.1m (vs. €30.7m in December 2022), a slight increase linked to the amount deriving from maximisation not yet collected, which has had a particular impact on WC. Cash-in is expected by the end of the year.

Outlook: Following these results, uncertainty remains regarding H2 market demand, and in particular the operation of BEG. For the time being, the competent authorities (ARERA) have blocked the maximisation procedure from September 2023. This would force the group to close the plant, as it would no longer be profitable.

On this basis, we therefore expect H2 to be on a par with H1, with revenue still down, and margins not far from end-2022 levels. For the time being, we are reiterating our estimates for the end of the year, framing 2023 as a transitional year with a view to a more dynamic 2024.

Document published on

8 September 2023 at 9:33am CET

BUY

TP 4.7€

Up/Downside: 48%

Key data

Price (€)	3.2
Industry	Diversified Paper
Ticker	NDT-IT
Shares Out (m)	14.218
Market Cap (m €)	45.1
Average trading volumes	0.256
(k shares / day)

Ownership (%)

Management	58.6
Free float	41.4

EPS (€)	12/23e	12/24e	12/25e
Estimates	0.33	0.38	0.48
Change vs previous	0.00	0.00	0.00
estimates (%)
Performance (%)	1D	1M	YTD
Price Perf	-3.4	-0.9	-3.1
Rel FTSE Italy	-3.5	-0.2	-18.1

3.8												230
3.6												210
3.4												190
3.2												170
3.0												150
2.8												130
2.6												110
-22	-22	-22	-22	-23	-23	-23	-23	-23	-23	-23	-23	-23
Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep
				Neodecortech				FTSE Italy

TP ICAP Midcap Estimates	12/22	12/23e	12/24e	12/25e		Valuation Ratio	12/23e	12/24e	12/25e		Consensus FactSet - Analysts:3	12/23e	12/24e	12/25e
Sales (m €)	196.5	176.9	183.0	187.3		EV/Sales	0.4	0.4	0.3		Sales	183.0	189.1	212.2
Current Op Inc (m €)	6.1	5.5	6.5	8.1		EV/EBITDA	5.0	4.3	3.3		EBIT	5.0	7.1	9.2
Current op. Margin (%)	3.1	3.1	3.5	4.3		EV/EBIT	13.6	10.7	7.2		Net income	3.9	5.5	6.8
EPS (€)	0.59	0.33	0.38	0.48		PE	9.7	8.3	6.6
DPS (€)	0.14	0.14	0.14	0.14
Yield (%)	4.4	4.4	4.4	4.4
FCF (m €)	-3.6	2.8	8.1	12.5

Classification: Internal

EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com

Document published on

8 September 2023 at 9:33am CET

FINANCIAL DATA

Income Statement

12/20

12/21

12/22

12/23e

12/24e

12/25e

Sales	127.8	176.4	196.5	176.9	183.0	187.3
Changes (%)	-3.9	38.0	11.4	-10.0	3.4	2.4
Gross profit	55.3	65.1	70.8	65.4	68.3	70.2
% of Sales	43.3	36.9	36.0	37.0	37.3	37.5
EBITDA	14.6	18.1	16.0	15.0	15.9	17.5
% of Sales	11.4	10.3	8.1	8.5	8.7	9.4
Current operating profit	5.5	9.2	6.1	5.5	6.5	8.1
% of Sales	4.3	5.2	3.1	3.1	3.5	4.3
Non-recurring items	0.0	0.0	0.0	0.0	0.0	0.0
EBIT	5.5	9.2	6.1	5.5	6.5	8.1
Net financial result	-1.4	-1.2	-0.6	-0.2	-0.2	-0.2
Income Tax	-0.5	-1.3	-0.8	-0.7	-0.8	-1.0
Tax rate (%)	13.0	16.6	8.7	12.7	12.7	12.7
Net profit, group share	3.5	6.7	8.4	4.6	5.5	6.9
EPS	0.27	0.49	0.59	0.33	0.38	0.48
Financial Statement	12/20	12/21	12/22	12/23e	12/24e	12/25e
Goodwill	0.0	0.0	0.0	0.0	0.0	0.0
Tangible and intangible assets	79.4	80.1	79.4	79.0	78.5	78.1
Right of Use	0.0	0.0	0.0	0.0	0.0	0.0
Financial assets	1.8	1.8	0.5	0.5	0.5	0.5
Working capital	29.5	27.2	36.2	38.5	36.4	31.3
Other Assets	2.2	2.0	2.2	2.2	2.2	2.2
Assets	113.0	111.1	118.4	120.2	117.7	112.1
Shareholders equity group	61.7	70.5	77.3	79.9	83.4	88.3
Minorities	0.0	0.0	0.0	0.0	0.0	0.0
LT & ST provisions and others	1.3	1.0	0.8	0.8	0.8	0.8
Net debt	39.9	29.3	30.7	29.9	23.9	13.4
Other liabilities	9.0	8.7	8.4	8.4	8.4	8.4
Liabilities	113.0	111.1	118.4	120.2	117.7	112.1
Net debt excl. IFRS 16	39.9	29.3	30.7	29.9	23.9	13.4
Gearing net	0.6	0.4	0.4	0.4	0.3	0.2
Leverage	2.7	1.6	1.9	2.0	1.5	0.8
Cash flow statement	12/20	12/21	12/22	12/23e	12/24e	12/25e
CF after elimination of net borrowing costs and taxes	11.9	15.8	14.7	14.1	14.9	16.3
∆WCR	-2.9	2.1	-9.1	-2.3	2.1	5.1
Operating cash flow	9.0	18.0	5.6	11.8	17.1	21.5
Net capex	-6.4	-9.7	-9.2	-9.0	-9.0	-9.0
FCF	2.6	8.2	-3.6	2.8	8.1	12.5
Acquisitions/Disposals of subsidiaries	0.0	0.1	-0.1	-0.0	-0.0	-0.0
Other investments	0.0	0.3	0.0	0.0	0.0	0.0
Change in borrowings	3.9	-4.7	4.6	0.0	0.0	0.0
Dividends paid	-1.9	-1.2	-2.0	-2.0	-2.0	-2.0
Repayment of leasing debt	0.0	0.0	0.0	0.0	0.0	0.0
Equity Transaction	-0.1	3.2	-0.3	0.0	0.0	0.0
Others	-0.5	0.1	0.0	0.0	0.0	0.0
Change in net cash over the year	4.1	6.0	-1.4	0.8	6.1	10.4
ROA (%)	2.3%	4.0%	5.0%	2.7%	3.0%	3.7%
ROE (%)	5.7%	9.5%	10.9%	5.8%	6.5%	7.8%
ROCE (%)	4.6%	7.6%	5.1%	4.3%	5.2%	6.8%

Classification: Internal	2
EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com

Document published on

8 September 2023 at 9:33am CET

DISCLAIMER

Analyst certifications

This research report (the "Report") has been approved by Midcap, a business division of TP ICAP (Europe) SA ("Midcap"), an Investment Services Provider authorised and regulated by the Autorité de Contrôle Prudentiel et de Résolution ("ACPR"). By issuing this Report, each Midcap analyst and associate whose name appears within this Report hereby certifies that (i) the recommendations and opinions expressed in the Report accurately reflect the research analyst's and associate's personal views about any and all of the subject securities or issuers discussed herein and (ii) no part of the research analyst's or associate's compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst or associate in the Report.

Methodology

This Report may mention evaluation methods defined as follows:

1. DCF method: discounting of future cash flows generated by the company's operations. Cash flows are determined by the analyst's financial forecasts and models. The discount rate used corresponds to the weighted average cost of capital, which is defined as the weighted average cost of the company's debt and the theoretical cost of its equity as estimated by the analyst.
2. Comparable method: application of market valuation multiples or those observed in recent transactions. These multiples can be used as references and applied to the company's financial aggregates to deduce its valuation. The sample is selected by the analyst based on the characteristics of the company (size, growth, profitability, etc.). The analyst may also apply a premium/discount depending on his perception of the company's characteristics.
3. Assets and liabilities method: estimate of the value of equity capital based on revalued assets adjusted for the value of the debt.
4. Discounted dividend method: discounting of estimated future dividend flows. The discount rate used is generally the cost of capital.
5. Sum of the parts: this method consists of estimating the various activities of a company using the most appropriate valuation method for each of them, then realizing the sum of the parts.

Conflict of Interests between TP ICAP Midcap and the Issuer

G. Midcap and the Issuer have agreed to the provision by the former to the latter of a service for the production and distribution of the investment recommendation on the said Issuer: Neodecortech

H. TPICAP Midcap prepared this document on behalf of BPER Banca S.p.A acting as specialist in accordance with article 2.3.4 of Rules of the Markets (and related instructions) organized and managed by Borsa Italiana S.p.A.: Neodecortech

History of investment rating and target price - Neodecortech

TARGET PRICE AND RATING HISTORY FOR

7 Sep

22 Oct

1 Feb

19 Apr

12 May

6 Jul

8 Sep

23 Feb

16 Mar

12 May

Buy : €4.4

Buy : €4.6

Buy : €4.8

Buy : €5.5

Buy : €5.7

Buy : €5.8

Buy : €6.4

Buy : €6.3

Buy : €5.8

Buy : €5.2

5

180

5

160

4

4

140

3

120

2

2

Nov-20

Feb-21

May-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

100

Aug-20

Sep-23

16 May

16 Mar

Buy : €5.3

Buy : €4.7

Neodecortech (L Axis)

FTSE Italy (R Axis)

Data source: FactSet Prices and Ratings

Classification: Internal	3
EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com

		Document published on
		8 September 2023 at 9:33am CET
Distribution of Investment Ratings
Rating	Recommendation Universe*	Portion of these provided with investment
		banking services**
Buy	80%	65%
Hold	17%	44%
Sell	3%	25%
Under review	1%	100%

Midcap employs a rating system based on the following:

Buy: Expected to outperform the markets by 10% or more over a 6 to 12 months horizon.

Hold: expected performance between -10% and +10% compared to the market over a 6 to 12 months horizon.

Sell: Stock is expected underperform the markets by 10% or more over a 6 to 12 months horizon.

The history of ratings and target prices for the Issuers covered in this report are available on request at https://researchtpicap.midcapp.com/en/disclaimer.

Classification: Internal	4
EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com

Document published on

8 September 2023 at 9:33am CET

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Classification: Internal	5
EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com