Neodecortech

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BASIC RESOURCES

Neodecortech (Buy) Q1 23: profitability held as sales declined less than expected

Analyser

Buy

Recommendation unchanged

Share price: EUR

3.35

closing price as of 05/05/2023

Target price: EUR

4.90

Target Price unchanged

Upside/Downside Potential

46.3%

Reuters/Bloomberg

NDT.MI/NDT IM

Market capitalisation (EURm)

48

Current N° of shares (m)

14

Free float

41%

Daily avg. no. trad. sh. 12 mth (k)

4

Daily avg. trad. vol. 12 mth (k)

7.11

Price high/low 12 months

3.90 / 2.78

Abs Perfs 1/3/12 mths (%)

1.52/-10.19/-12.30

Key financials (EUR)

12/22

12/23e

12/24e

Sales (m)

204

166

171

EBITDA (m)

16

13

16

EBITDA margin

7.8%

7.8%

9.6%

EBIT (m)

6

3

7

EBIT margin

3.0%

2.1%

4.0%

Net Profit (adj.)(m)

5

3

5

ROCE

3.9%

2.2%

4.3%

Net debt/(cash) (m)

31

31

26

Net Debt/Equity

0.4

0.4

0.3

Debt/EBITDA

1.9

2.4

1.6

Int. cover(EBITDA/Fin. int)

25.2

(20.4)

(25.7)

EV/Sales

0.4

0.5

0.4

EV/EBITDA

4.8

5.9

4.4

EV/EBITDA (adj.)

4.8

5.9

4.4

EV/EBIT

12.5

22.1

10.6

P/E (adj.)

8.1

16.0

8.8

P/BV

0.6

0.6

0.6

OpFCF yield

-0.5%

8.1%

13.5%

Dividend yield

4.2%

4.5%

5.1%

EPS (adj.)

0.40

0.21

0.38

BVPS

5.48

5.55

5.78

DPS

0.14

0.15

0.17

Shareholders

Valentini Family 59%;

4.00

3.80

3.60

3.40

3.20

3.00

2.80

2.60May 22

Jun 22

Jul 22

Aug 22

Sep 22

Oct 22

Nov 22

Dec 22

Jan 23

Feb 23

Mar 23

Apr 23

May 23

Source: FactSet

NEODECORTECH

FTSE Italy STAR (Rebased)

8 May 2023

Q1 23: profitability held as sales declined less than expected

The facts: NDT reported its Q1 23 results on 5 May.

Our analysis: We summarise the main lines of the release below.

EURm

Q1 23

Q1 22

∆% Y/Y

Q1 23e

Printed decorative paper

18.1

19.6

-7.6%

17.4

Decorative paper

17.0

19.9

-14.6%

16.9

Energy

11.3

9.7

16.6%

10.7

Net sales

46.4

49.2

-5.7%

45.1

EBITDA

3.7

4.2

-12.0%

3.2

EBITDA Margin

8.0%

8.6%

-0.6pp

7.0%

EBIT

1.5

1.9

-22.3%

0.9

EBIT Margin

3.2%

3.8%

-0.7pp

1.9%

Net income adj.

1.2

1.4

-7.6%

0.5

Net income

1.2

4.2

-70.4%

0.5

Net debt (cash)

38.6

31.3

23.4%

35.7

Net sales came in slightly better than anticipated, with a decline of 5.7%% (vs. our -8.5%), thanks to the printed decorative paper (NDT) and the energy (BEG) divisions.

At the EBITDA level, margin was 8%, beating our expectations. Despite the unfavourable operating leverage, raw materials costs continued to decline, particularly resins, titanium dioxide, cellulose, plastic materials and decorative paper. Furthermore, the company said that fuels and energy costs dropped by 26.5% Y/Y, thanks to the lower spot prices and the government subsidies.

The company also said that, in order to secure a reasonable stockpile of raw materials at lower prices, which supported the operating profitability, they decided to pay in advance many inputs. Indeed, the decrease in trade payables, which absorbed ~EUR 5.5m in the operating NWC in Q1 23, explains most of the increase in the net debt (EUR 7.9m vs. Dec-22). In addition, the government subsidies granted to BEG for its renewable energy production (~EUR 2.5/3m) were not cashed in, thus increasing the current receivables in the total NWC.

Outlook. The company confirmed that the order intake reverted its downward trend in March 2023 and was close to the group's historical average. The decline in input costs is supportive and is expected to continue in 2023, although sales prices are under pressure, as customers ask for lower prices in order to benefit from the upstream deflation. All in all, the management forecast to further improve profitability, by applying timely and under-proportionate cuts in sales prices (compared with the input cost trend).

Analyst(s)

Gian Marco Gadini gianmarco.gadini@bancaakros.it +39 02 4344 4236

Conclusion & Action: the sales trend is better than anticipated and the next few months' orders are encouraging. Recovering profitability remains the main challenge, particularly given the customer's pressure. Finally, the spike in the NWC (and in the net debt) is not concerning, since it is mainly a one-off item to secure lower prices on raw materials (with benefits on P&L expected throughout 2023). Recommendation and target confirmed.

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Neodecortech S.p.A. published this content on 11 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 May 2023 10:43:08 UTC.