REWAY GROUP S.P.A. U P D A T EE Q U I T Y R E S E A R C H
Reway Group
Euronext Growth Milan | Infrastructure Mainteinance |
Italy
Production 12/04/2024, h. 18:30
Published 15/04/2024, h. 07:00
Rating | Target Price |
BUY | € 8,30 |
unchanged | (prev. € 7,15) |
Risk | Upside potential |
Medium | 57,7% |
Key Financials (€/mln) | FY23A* | FY24E | FY25E | FY26E |
Revenues | 180,89 | 207,00 | 230,00 | 250,00 |
VoP | 185,15 | 207,80 | 231,00 | 251,00 |
EBITDA | 38,72 | 42,50 | 48,50 | 54,00 |
EBIT | 31,88 | 29,50 | 35,00 | 40,50 |
Net Profit | 20,28 | 16,50 | 20,00 | 25,00 |
EBITDA margin | 21,4% | 20,5% | 21,0% | 21,5% |
EBIT margin | 17,6% | 14,3% | 15,2% | 16,2% |
Net Profit margin | 11,0% | 7,9% | 8,7% | 10,0% |
Stocks performance relative to FTSE Italia Growth
180 | 300 k | |
165 | 250 k | |
150 | ||
135 | 200 k | |
120 | ||
105 | 150 k | |
90 | 100 k | |
75 | ||
60 | 50 k | |
45 | ||
30 | 0 k | |
Apr-23Jun-23Aug-23 | Oct-23Dec-23 | Feb-24 |
RWY-IT - Volume | RWY-IT | ITAIM Index |
Stock Data
Price | € 5,26 |
Target price | € 8,30 |
Upside/(Downside) potential | 57,7% |
Ticker | RWY IM |
Market Cap (€/mln) | € 202,52 |
EV (€/mln) | € 237,13 |
Free Float | 16,8% |
Share Outstanding | 38.502.281 |
52-week high | € 5,48 |
52-week low | € 3,16 |
Averge Daily Volumes (3m) | 21.766 |
Mattia Petracca | mattia.petracca@integraesim.it Giuseppe Riviello | giuseppe.riviello@integraesim.it
Stock performance | 1M | 3M | 6M | 1Y |
Absolute | 13,6% | 2,0% | 24,7% | 47,1% |
to FTSE Italia Growth | 0,5% | 0,6% | -5,0% | -11,2% |
to Euronext STAR Milan | 0,8% | -1,6% | 7,8% | -3,0% |
to FTSE All-Share | 7,8% | 12,3% | 17,0% | 29,9% |
to EUROSTOXX | 5,0% | 10,3% | 16,9% | 21,4% |
to MSCI World Index | 4,4% | 10,1% | 16,2% | 28,2% |
Main Ratios | FY23A* | FY24E | FY25E | FY26E |
EV/EBITDA | 6,1x | 5,6x | 4,9x | 4,4x |
EV/EBIT | 7,4x | 8,0x | 6,8x | 5,9x |
P/E | 10,0x | 12,3x | 10,1x | 8,1x |
FY23A Results
The pro-forma figures for 2023 show the results of the new perimeter of the Reway Group, which records a value of production of €185.15 million, compared to the FY22A pro-forma figure of €163.90 million. The EBITDA for the period stands at €38.72 million, marking an increase of 13.4% compared to the pro-forma result of the previous year, which was €34.14 million. EBIT is €31.88 million, marking a +23.8% compared to the pro-forma 2022 figure of €25.75 million. Net Income is also positive and growing, with a value of €20.28 million compared to €13.57 million in FY22A.
Estimates Update
In light of the results published in the annual report for FY23A, we are slightly adjusting our estimates for the current year and for the coming years. Specifically, we estimate the value of production for FY24E to be €207.80 million and an EBITDA of €42.50 million, corresponding to a margin of 20.5%. For the following years, we expect the value of production to increase up to €251.00 million (CAGR 23A*-26E: 10.7%) in FY26E, with an EBITDA of €54.00 million (corresponding to a margin of 21.5%), an increase from €38.72 million in FY23A* (cor- responding to an EBITDA margin of 21.4%).
Valuation Update
We have conducted the assessment of the equity value of Reway Group based on the DCF methodology and the multiples of a sample of comparable companies. The DCF method (which includes a prudential specific risk of 2.5% in the WACC calculation) returns an equity value of €352.6 million. The equity value of Reway Group using market multiples is €286.3 million (including a discount of 10.0%). This results in an average equity value of approximately €319.4 million. The target price is €8.30, with a BUY rating and MEDIUM risk.
RWY IM
U P D A T E
BUY € 8,30
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Economics & Financials
TABLE 1 - ECONOMICS & FINANCIALS
CONSOLIDATED INCOME STATEMENT (€/mln) | FY22A* | FY23A* | FY24E | FY25E | FY26E |
Revenues | 160,81 | 180,89 | 207,00 | 230,00 | 250,00 |
Other Revenues | 3,09 | 4,26 | 0,80 | 1,00 | 1,00 |
Value of Production | 163,90 | 185,15 | 207,80 | 231,00 | 251,00 |
COGS | 38,99 | 41,63 | 57,80 | 64,00 | 69,00 |
Services | 52,22 | 55,35 | 55,30 | 61,90 | 67,00 |
Use of Asset owned by others | 12,85 | 20,22 | 17,00 | 18,00 | 19,00 |
Employees | 24,32 | 27,67 | 34,50 | 37,80 | 41,00 |
Other operating costs | 1,38 | 1,57 | 0,70 | 0,80 | 1,00 |
EBITDA | 34,14 | 38,72 | 42,50 | 48,50 | 54,00 |
EBITDA Margin | 21,2% | 21,4% | 20,5% | 21,0% | 21,5% |
D&A | 8,39 | 6,84 | 13,00 | 13,50 | 13,50 |
EBIT | 25,75 | 31,88 | 29,50 | 35,00 | 40,50 |
EBIT Margin | 16,0% | 17,6% | 14,3% | 15,2% | 16,2% |
Financial Management | (3,05) | (1,90) | (5,00) | (5,00) | (4,00) |
EBT | 22,71 | 29,98 | 24,50 | 30,00 | 36,50 |
Taxes | 9,14 | 9,70 | 8,00 | 10,00 | 11,50 |
Net Income | 13,57 | 20,28 | 16,50 | 20,00 | 25,00 |
CONSOLIDATED BALANCE SHEET (€/mln) | FY22A* | FY23A* | FY24E | FY25E | FY26E |
Fixed Assets | 92,47 | 87,20 | 80,70 | 73,70 | 66,70 |
Account receivable | 83,02 | 93,03 | 88,00 | 100,00 | 112,00 |
Inventories | 17,60 | 43,12 | 48,00 | 52,00 | 56,00 |
Account payable | 40,80 | 49,55 | 50,00 | 60,00 | 70,00 |
Operating Working Capital | 59,81 | 86,60 | 86,00 | 92,00 | 98,00 |
Other Receivable | 1,38 | 3,67 | 10,00 | 12,00 | 15,00 |
Other Payable | 5,58 | 11,45 | 13,50 | 13,50 | 13,50 |
Net Working Capital | 55,62 | 78,81 | 82,50 | 90,50 | 99,50 |
Severance & other provisions | 2,54 | 3,78 | 4,50 | 6,00 | 6,50 |
Net Invested Capital | 145,54 | 162,23 | 158,70 | 158,20 | 159,70 |
Share Capital | 0,71 | 0,71 | 0,71 | 0,71 | 0,71 |
Reserves | 48,04 | 55,02 | 74,65 | 91,15 | 111,15 |
Net Income | 7,64 | 19,64 | 16,50 | 20,00 | 25,00 |
Equity | 56,39 | 75,36 | 91,86 | 111,86 | 136,86 |
Minorities Equity | 18,74 | 0,65 | 0,00 | 0,00 | 0,00 |
Cash & cash equivalents | 37,74 | 27,76 | 16,16 | 29,66 | 46,16 |
Short term financial debt | 55,70 | 16,79 | 15,00 | 14,00 | 13,00 |
M/L term financial debt | 52,46 | 72,89 | 68,00 | 62,00 | 56,00 |
Net Financial Position Adjusted | 70,42 | 61,92 | 66,84 | 46,34 | 22,84 |
Other debt | 0,00 | 24,30 | 0,00 | 0,00 | 0,00 |
Net Financial Position | 70,42 | 86,22 | 66,84 | 46,34 | 22,84 |
Sources | 145,54 | 162,23 | 158,70 | 158,20 | 159,70 |
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U P D A T E
BUY € 8,30
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CONSOLIDATED CASH FLOW (€/mln) | FY23A* | FY24E | FY25E | FY26E |
EBIT | 31,88 | 29,50 | 35,00 | 40,50 |
Taxes | 9,70 | 8,00 | 10,00 | 11,50 |
NOPAT | 22,18 | 21,50 | 25,00 | 29,00 |
D&A | 6,84 | 13,00 | 13,50 | 13,50 |
Change in NWC | (23,20) | (3,69) | (8,00) | (9,00) |
Change in receivable | (10,01) | 5,03 | (12,00) | (12,00) |
Change in payable | 8,75 | 0,45 | 10,00 | 10,00 |
Change in inventories | (25,52) | (4,88) | (4,00) | (4,00) |
Change in others | 3,59 | (4,29) | (2,00) | (3,00) |
Change in provisions | 1,24 | 0,72 | 1,50 | 0,50 |
Operating Cash Flow | 7,07 | 31,53 | 32,00 | 34,00 |
Capex | (1,57) | (6,50) | (6,50) | (6,50) |
Free Cash Flow | 5,50 | 25,03 | 25,50 | 27,50 |
Financial Management | (1,90) | (5,00) | (5,00) | (4,00) |
Change in financial debt | (18,48) | (6,68) | (7,00) | (7,00) |
Change in other debt | 24,30 | (24,30) | 0,00 | 0,00 |
Change in equity | (19,39) | (0,65) | 0,00 | 0,00 |
Free Cash Flow to Equity | (9,97) | (11,60) | 13,50 | 16,50 |
Source: Reway Group and Integrae SIM estimates | *Pro-forma |
Company Overview
Reway Group SpA, the parent company of Reway Group, is the Italian leader for the reconditioning and redevelopment of road and motorway infrastructures. Reway Group, with its registered office in Milan, was established in December 2021 with the aim of providing a single managerial structure to the three operating companies wholly owned by the Luccini family:
- MGA - Manutenzione Generale Autostrade Srl, active in the sector of the reconditioning of concrete infrastructures, viaducts, and tunnels;
- Soteco Srl, dealing with the finishing, cladding and lighting of tunnels, and the installation of sound-absorption and safety barriers;
- TLS - Tecnologie Lavori Stradali Srl, providing know-how, across Italy and the world, on site engineering and motorway maintenance, with particular expertise in the seismic upgrading of bridges and via- ducts.
The Parent Company provides centralized services to the subsidiaries, including strategic and financial planning, procurement, technical accounting, documentary support for the preparation of tenders and safety policies, and fleet management. Reway Group is also, since October 2023, the only Italian operator to include extraordinary railway network maintenan- ce, in addition to roadways maintenance, in its core business, thanks to the acquisition of Gema SpA (originally Se.Gi. SpA), one of the leading Italian operators active in the sector of railway sector infrastructure and civil works maintenance.
RWY IM
U P D A T E
BUY € 8,30
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FY23A Results
TABLE 2 - ACTUAL VS ESTIMATES FY23A
€/mln | Revenues | EBITDA | EBITDA % | EBIT | Net Income | NFP |
FY23A | 132,29 | 26,44 | 20,5% | 22,20 | 14,59 | 34,61 |
FY23E | 137,75 | 26,20 | 19,1% | 21,20 | 14,15 | 73,34 |
Change | -4,0% | 0,9% | 1,4% | 4,7% | 3,1% | n/a |
Source: Integrae SIM
In the press release dated March 28, 2024, Paolo Luccini, President and CEO of Reway Group, commented: "We are closing 2023 with success, and record economic and financial performance, with double-digitgrowth for the main economic indicators, from the value of production through to margins and the order backlog. In 2023, the year of our listing on the Euronext Growth Milan market, we further strengthened our leadership in the field of the rehabilitation of road and motorway infrastructures, with the awarding of important contracts. Then, in the last quarter of the year, we entered the railway maintenance sector through the acquisition of Gema, allowing us to become the only operator in Italy to have both roadway and railway maintenance in its core business, and therefore to acquire a distinctive positioning that expands business opportunities, as confirmed by the various orders awarded in recent months".
Reway Group, in its consolidated financial statements as of December 31, 2023, fully included the equity data of the newly acquired Gema SpA, a leading Italian operator in the railway rehabilitation and maintenance sector, while the financial data was consolidated from the end of November 2023, that is, from the date on which the acquisition of 70.0% of the company's share capital was concluded.
The consolidated value of production came in at € 132.29 million, up from € 110.54 million in FY22A (+19.7%), with a backlog of orders equal to approximately € 818.00 million, which will be fulfilled within the next five financial years. The financial results mark a positive growth compared to 2022, in line with our previous report's estimate, with consolidated EBITDA equal to € 26.44 million (vs. € 19.59 million in FY22A, and € 26.20 million estimated), while Net Income amounted to € 14.59 million, compared to € 9.97 million in the previous year and the estimated figure of € 14.15 million.
The Company voluntarily issued pro-forma equity and financial statements for 2023 and 2022, with the aim of fully consolidating the results of Gema SpA, and retroactively reflecting the exercising of the Call option on the remaining portion of 30.0 % of its share capital, together with the related financing of € 27.00 million.
The operation was divided into two phases, the first being the acquisition of 70.0% of the target's share capital, concluded on November 21, 2023 for an amount of € 63.00 million, financed in part (approximately € 16.00 million) with own resources collected through the Euronext Growth Milan listing, and, for the remaining part (€ 47.00 million), with a bank
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loan from a pool of financiers. The operation incorporated, in addition to the commitment to return to the selling shareholders a Price Adjustment of € 48.60 million, the possibility to purchase, after the date of approval of the financial statements as of December 31, 2025, the remaining 30.0% of Gema's share capital.
Then, in March 2024, in light of the good company performance and the willingness of the selling shareholders, Reway Group decided to exercise the Call option early and therefore raise the company's share capital to 100.0%. The purchase of the remaining 30.0% of the shares will take place through a payment, by May 2024, of € 26.20 million (financed through a bank loan for € 27.00 million), allowing Reway to obtain a significant economic advantage in a 50.0% reduction of the Price Adjustment, worth € 24.30 million, to be paid at the same time as the collection of certain trade receivables claimed by Gema. The value of the operation therefore amounts to € 113.50 million.
The pro-forma statements indicate the results of the new perimeter of Reway Group, recording a value of production of € 185.15 million, up 13.0% compared to the FY22A pro-forma figure of € 163.90 million.
Gema's contribution is therefore significant, with an increase in the order portfolio through the awarding of new work for approximately € 84.00 million, under four framework agreements subscribed by the Italian Railways Network (RFI), as temporary joint ventures bringing together various partners in the carrying out of large-scale works. Taking into account the new agreements and orders obtained from Soteco and MGA, the Group's order backlog has now reached a value of approximately € 818.00 million, distributed over the next 5 financial years. In particular, the subsidiary Soteco was awarded a contract worth
- 35.00 million for the modernization of road barriers of sections licensed to the company Autostrade per l'Italia, while MGA won a contract for the similar amount of € 33.00 million for the rehabilitation of viaducts in Central Italy, as well as a € 62.00 million contract for the design and construction of a tunnel along the Amatrice-Montereale-L'Aquila axis, heralding entry into the field of new infrastructure construction.
EBITDA for the period came in at € 38.72 million, marking an increase of 13.4% compared to the pro-forma result of the previous year, equal to € 34.14 million. The EBITDA margin remained substantially in line, going from 21.2% to 21.4%, though marking an increase of more than three percentage points compared to the Group's margin in 2022 (i.e. before the acquisition of Gema), equal to 17.8%. The increase is, in fact, attributable precisely to the integration of the subsidiary, which has historically boasted higher margins than the motorway maintenance sector. Furthermore, in 2023, the new procurement decree introduced a price adjustment mechanism that is expected to benefit the margins of all companies in the sector, and of the Group in particular. Therefore new efficiencies can be expected in the coming years.
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EBIT, after depreciation and amortization of € 6.84 million, including amortization of Ge- ma's goodwill, came in equal to € 31.88 million, marking a 23.8% increase on the 2022 pro-forma figure of € 25.75 million. Net income, affected by the increase in financial charges related to new bank loans, is also positive and growing, at a value of € 20.28 million compared to € 13.57 in FY22A.
On the balance sheet, we note, as expected, a worsening in the NFP, to a value of € 86.22 million, compared to a 2022 figure of € 70.42 million. The change is a direct consequence of taking out additional financing for a total of € 27.00 million, for the early exercise of the Call option to acquire the remaining 30.0% of Gema. To separate the effect of the Price Adjustment (€ 24.30 million), and therefore provide a clearer picture of the Group's debt situation, we have also calculated an Adjusted NFP, obtaining a value of € 61.92 million. Net of the effect of the new financing, we obtain the NFP indicated in the statutory financial statements (not pro-forma) equal to approximately € 34.00 million, in line with the estimated figure of € 33.34 million.
2023 therefore ended on a very positive note for Reway Group, which, during the year, concluded the acquisition of minority shares of MGA (through the contribution of assets and a paid capital increase), listing on the stock exchange, and the acquisition of Gema SpA, marking the Group's entry into the sector of extraordinary maintenance of railway in- frastructures. Thanks to these operations, Reway has become the only Italian player in the rehabilitation of bridges, viaducts and tunnels in road, motorway and railway networks, therefore placing itself at the center of the investment plans of all the major national operators (ANAS, RFI, Autostrade per l'Italia), and guaranteeing a significant order backlog bound to increase over the coming years.
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FY24E - FY26E Estimates
TABLE 3 - ESTIMATES UPDATES FY24E-26E
€/mln | FY24E | FY25E | FY26E |
VoP | |||
New | 207,8 | 231,0 | 251,0 |
Old | 207,8 | 231,0 | n/a |
Change | 0,0% | 0,0% | n/a |
EBITDA | |||
New | 42,5 | 48,5 | 54,0 |
Old | 42,5 | 48,5 | n/a |
Change | 0,0% | 0,0% | n/a |
EBITDA % | |||
New | 20,5% | 21,0% | 21,5% |
Old | 20,5% | 21,1% | n/a |
Change | -0,1% | -0,1% | n/a |
EBIT | |||
New | 29,5 | 35,0 | 40,5 |
Old | 29,5 | 35,0 | n/a |
Change | 0,0% | 0,0% | n/a |
Net Income | |||
New | 16,5 | 20,0 | 25,0 |
Old | 16,5 | 20,0 | n/a |
Change | 0,0% | 0,0% | n/a |
NFP | |||
New | 66,8 | 46,3 | 22,8 |
Old | 24,1 | 4,6 | n/a |
Change | n/a | n/a | n/a |
Source: Integrae SIM
In light of the results published in the annual report for FY23A, we can confirm our estimates for the current year and the following years, also considering the prospective equity and financial data for the 2026 financial year. In particular, we estimate an FY24E value of production of € 207.80 million, and an EBITDA of € 42.50 million, corresponding to a margin of 20.5%. In the following years, we expect the value of production to reach € 251.00 million (CAGR 23A*-26E: 10.7%) in FY26E, with EBITDA equal to € 54.00 million (corresponding to a margin of 21.5%), up from € 38.72 million in FY23A (corresponding to an EBITDA margin of 21.4%).
On the balance sheet, however, we have adjusted our previous estimate of the NFP to take into account the new loan obtained for the early exercising of the Call option on the remaining 30.0% share of Gema. We therefore expect the figure to reach € 22.84 million of debt in 2026.
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CHART 1 - VOP AND EBITDA FY22A*-26E (€/MLN) | |||||||||
280,00 | 251,00 | ||||||||
231,00 | |||||||||
240,00 | |||||||||
207,80 | |||||||||
185,15 | |||||||||
200,00 | 163,90 | ||||||||
160,00 | |||||||||
120,00 | |||||||||
80,00 | 42,50 | 48,50 | 54,00 | ||||||
34,14 | 38,72 | ||||||||
40,00 | |||||||||
0,00 | |||||||||
FY22A* | FY23A* | FY24E | FY25E | FY26E | |||||
Value of production | EBITDA | ||||||||
Source: Integrae SIM | *Pro-forma |
CHART 2 - MARGIN FY22A*-26E | |||||
25,0% | 21,4% | 21,5% | |||
21,2% | 20,5% | 21,0% | |||
20,0% | |||||
15,0% | 16,0% | 17,6% | 14,3% | 15,2% | 16,2% |
10,0% |
5,0%
0,0%
FY22A* | FY23A* | FY24E | FY25E | FY26E | |
EBITDA margin | EBIT margin | ||||
Source: Integrae SIM | *Pro-forma |
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CHART 3 - CAPEX FY22A*-26E (€/MLN) | |||||||||
280,00 | 250,00 | ||||||||
230,00 | |||||||||
240,00 | |||||||||
207,00 | |||||||||
200,00 | 160,81 | 180,89 | |||||||
160,00 | |||||||||
120,00 | |||||||||
80,00 | 77,23 | ||||||||
40,00 | 1,57 | 6,50 | 6,50 | 6,50 | |||||
0,00 | |||||||||
FY22A* | FY23A* | FY24E | FY25E | FY26E | |||||
Revenues | Capex | ||||||||
Source: Integrae SIM | *Pro-forma |
CHART 4 - NFP FY22A*-26E (€/MLN) | ||||||||
90,00 | 86,22 | |||||||
75,00 | 66,84 | |||||||
60,00 | 70,42 | |||||||
45,00 | ||||||||
30,00 | 46,34 | |||||||
15,00 | 22,84 | |||||||
0,00 | ||||||||
FY22A* | FY23A* | FY24E | FY25E | FY26E | ||||
Net Financial Position | ||||||||
Source: Integrae SIM | *Pro-forma |
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Reway Group S.p.A. published this content on 15 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 April 2024 15:31:06 UTC.
