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Plant making take centre stage in H1 24 with strong growth and margins'' expansion Danieli reported sales growth of 11% driven by strong plant making (+23%) which is executing the higher backlog achieved in the last quarters, while the steelmaking division reported a decline of sales by 9% due to weak prices (c. -27%) not completely offset by increasing volumes (c. +25%). EBITDA was EUR160.6m (broadly with our expectation) with 7.8% margin on sales (in line with last year). The plant making division showed an expansion of the EBITDA margin from 6.4% in H1 23 to 8.7% in H1 24 offsetting the strong decline in the steelmaking division (down from 10.7% to 5.5%) mostly driven by temporary impact from expensive inventory held. The reported net cash reached EUR1.66bn which excluding prepayments equals to c. EUR460m (EUR553m in June 23). Plant Making orders were flattish with a BtoB of 0.9x but some orders still not included The order intake in the plant making division is estimated to have been flattish YoY with a book to bill at 0.9x as steel customers may have preferred to delay some marginal capex in face of declining steel prices. In the press release management underlined that some important orders, waiting for the finalization of the financing, were not included still in the backlog. OP reiterated (TP EUR39) - still cheap and with upside from steelmakers'' green capex With the stock still trading on 4.6x EV/EBIT CY25e and c. 7.5x P/E (c. 5x if we strip out adj. net cash) we believe the market still do not fully price in in the 15% EBIT CAGR we expect in 23-26e and the sustainability of such earnings growth of the business. We believe delivery of such strong growth path thanks to continuous strong order intake, expansion of PM margins to the higher end of the historical range and recovery of profit growth in steelmaking should lead to a rerating of the stock. Saving shares are trading still at c. 25% discount to the ordinary shares, a level lower than...
Danieli & C Officine Meccaniche Danieli & C. Officine Meccaniche S.p.A.
As we await the EUR2bn Metinvest order for the new Italian plant, book to bill will hardly surprise to the upside at H1 24 results (7 March), but the story of margin expansion should surprise positively. Plantmaking margins should surprise to the upside In our view, plantmaking margins should surprise to the upside thanks to an expansion of almost 200bps (from 6.4% EBITDA margin in H1 23 to 8.2% in H1 24), compared to guidance of flattish margins in FY24. This should also allow group margins to deliver a 70bps expansion despite a likely decrease in steelmaking margins. Such trends should be driven by the improving technological mix of new orders, which are increasingly based on green technologies and/or automated solutions. We expect Plantmaking sales to grow by 12.2%, helping in terms of economies of scale. In addition, we believe that the ''repricing'' of the backlog after the spike in raw material costs in mid-2022 will further help improve margins. On the other hand, the absence of large orders in the plantmaking division should translate to a book to bill of c.1x, with orders at a similar level to last year. Steelmaking sales and margins should be down, but is that really new? Not in our view In H1 24 we estimate that the steelmaking division will show a 15% decline of the top line, fully driven by negative pricing (-22%e), while volumes will likely have grown by +9%. EBITDA margin should decrease 100bps to 9.2% (from 10.2% in H1 23), according to our estimates. Should this worry investors? We do not believe so, as our annual 2024 estimates and company guidance were already built on a margin compression of 100bps (and we expect pricing declines of -15%). OP reiterated - TP up to EUR39 (from EUR36) on peers'' rerating We keep our OP rating as we see Danieli as a structural growth story - a pure play on green steel capex that we believe is trading cheaply at 7.3x P/E CY25, 4x EV/EBIT and 1.2x EV/CE (ROCE20%). We increase our TP to EUR39 due to...
Danieli reported consensus-beating results for FY22/23. These were particularly supported by the Plant-making segment, as expected. The outlook given is solid, with results more or less flat compared the strong FY22/23 (and the usual “conservatism” of the group’s communication). We will upgrade our numbers at least for FY23/24, with a positive impact on the valuation of course.
H2 23 results show strong margin expansion in plant making and peak orders Danieli reported H2 23 sales growth of +8% driven by 29% sales growth in the plant making division. Group EBITDA was EUR278.4m in H2 23, margin of 12.4% (vs 11.7% in H2 22) sustained by a strong margin expansion in the plant making division (12.5% vs 9.3% in H2 22) thanks to operating leverage and better margins for the new orders. Plant making backlog is at EUR5.8bn, new historical high and 2x the historical level. Order intake surprised on the upside to EUR3.5bn, a new peak, with a book-to-bill of 1.5x. Net cash reached EUR1.6bn, excl. net advance payments c. EUR600m (vs EUR360m in FY22). Dividend per share will be EUR0.3/share (1.2% yield). Steelmaking suffered from negative pricing but had good margins The steelmaking sales declined -15% in H2 23 with flat volumes. EBITDA margin normalized at 12.3%, lower than 14.4% in H2 22 which was a peak. In FY24 DAN expects volumes growth. 2024 targets points to 10% upside to consensus EBITDA, we are 30% above consensus EPS DAN targets EUR4bn-EUR4.3bn sales (BNPPE EUR4.15bn), EBITDA EUR400m-EUR430m (BNPPE EUR423m), Net cash EUR1.4bn-EUR1.6bn (BNPPE EUR1.59bn) and order book at EUR6bn-EUR6.5bn (BNPPE EUR6.47bn). Such targets imply c.10% upside to consensus EBITDA at mid-point. We have revised up our EPS estimates by 23%/26% in FY24/25 mainly due to higher estimated yields on the cash (EUR2bn) and to better PM profits as orders surprised positively. OP reiterated (SOTP based TP raised to EUR36) - GARP story on green capex surge We have revised up our TP due to the higher estimates. The investment case presented in the last recent report (DANIELI: Riding the green steel capex surge) is still valid. We expect 23/26 EBIT CAGR of 12% driven by steelmakers green capex wave and margin expansion. The stock still trades at 6.5x CY24 P/E and 4x EV/EBIT CY24. Next catalyst should be the award of a EUR1bn/EUR2bn order from Meltinvest. The...
As steelmaker FCF goes down and capex goes up, investor attention should shift to Danieli The green capex story is not new, but Danieli has underperformed the steel sector since 2016. So why should it outperform now? Until 2020, the plant-making market was under pressure, and in 2021-2023 investors focused on the booming profitability of steelmakers. This is now set to go into reverse. While we expect steelmaker margins to stay high, their FCF generation should decline, with capex doubling versus history. This suggests 35% higher orders for DAN and an EBIT CAGR of 14%. This diverging performance trend should also increasingly focus investor attention on Danieli, the only listed ''pure play'' on green capex. Green capex, a structural trend lifting plant-making orders by 35%+ vs historical average Danieli is a full-line supplier and ranks in the Top-2 worldwide in EAF and DRI technologies, which are the basis of green steel production. Investors seem willing to reward the ''cleaner'' players with higher valuations. The main driver of the stock is new orders, and the BNPPE steel team expects a surge of green capacity in EU post-2025 (we note orders are placed a couple of years in advance). Furthermore, advanced green technology is a higher margin business. Steelmaking division: normalization of PandL, destocking to end soon and expansion ongoing The steelmaking division of Danieli is 100% EAF-based and targets 45% CO2/t reduction by 2030 (highest among steelmakers). This deserves a 10% premium valuation to peers in our view. Post destocking, volume growth should restart in FY24, and capacity should expand 25%+ by 2027. GARP story: cheaper than history, growing fast and with optionality from conversion DAN always looked cheap, but is now much cheaper than its historical multiples, trading at 7.5x P/E (vs 12x hist avg) and 4x EV/EBIT (vs 8x) in CY24. EBIT/EPS CAGR in FY23/FY26 is seen at c. 14% (fully driven by the plant-making division, 22% EBIT...
We expect mixed trends with steelmaking tracking above guidance but plant making lagging Danieli will report H1 22/23 results on March 9th. According to our estimates sales should grow by +6.4% to EUR1.67bn with mixed trends at steelmaking (-8%, trending above guidance) and the PM division (+18% yoy, lagging guidance so far). EBITDA margin should expand by 90bps YoY (to 8.5%) thanks to 60bps gain in PM (to 8%) while steelmaking margin should expand by 190bps (to 9.3%). Net cash should increase to EUR1.25bn (vs EUR1.2bn in June 2022) thanks to NWC-driven cash release in steelmaking and operating cash flow. Order intake should stay strong in the PM division, with a book-to-bill 1x. Adj. EPS fine-tuned +2%/5% in FY23e/24e to incorporate higher rates - still above guidance We have fine-tuned our EPS estimates due to the incorporation of slightly higher rates on the EUR1.2bn net cash position as our last update was in September 2022, well ahead of the upward cycle of interest rates. Our profitability estimates remain above the company''s guidance and consensus with revenues at EUR3.6bn (DAN guidance EUR3.5/3.7bn range, consensus EUR3.7bn), and EBITDA at EUR359m, which is 9% above DAN guidance (at EUR320m/340m) and 7% above consensus (at c. EUR335m). We lower our IFRS FY23 EPS for negative FX impact. OP reiterated - TP increased to EUR32 (vs EUR26 previously) due to peers rerating We reiterate our Outperform rating as we continue to believe that Danieli offers structural growth thanks to its exposure to the long-lasting steelmakers green capex wave, driving up its order intake and margins. With ROCE at 17%+ and EV/CE of 1.1x in FY24e, we find the stock cheap. We expect FY22/25e EBIT CAGR at 14%. The stock trades on c. 4.5x EV/EBIT CY24e and c. 7x P/E ex-restated cash. In our view, the proposal to convert the savings shares into ordinary shares after the end of the date of effectiveness of the double voting rights mechanism of the family (May...
The group released a solid set of results for FY21/22 The contribution of the steel segment was impressive, as expected The plant-making segment is delivering as well, in particular with a great order-book The “cleaning” of the steel industry is definitely an opportunity for Danieli We will adjust our numbers and valuation upwards
Steelmaking surprises positively and orders are still strong in H2 2021/2022 Danieli reported positively surprising results in the steelmaking division with sales growth of +66% of which price/mix +62% and volumes growth around 4%e. This positive pricing trend allowed the group to post record high margins at 14.4% EBITDA margin in H2 22 (vs 12% in H2 21 and the previous peak of 13.6%) benefiting from inventory build-up of many customers who were less focused on pricing and more on being sure of the supply on time. The plant making division continued to post a book to bill of around 1.5x and orders at similar levels to H2 21. The impact of the discontinuation of most business with Russian clients did not prevent Danieli from posting 19% sales growth. The EBITDA margin stood at 9.3% (vs 9.2% in H2 21) as the increase in costs from the previous year prevented a margin expansion driven by better technological mix in our view. Net cash reached EUR1.2bn; excluding net prepayments net cash was EUR387m, improving materially compared to roughly EUR100m in FY20/21, mirroring good FCF generation. FY22/23 guidance in line with consensus - EPS down by 5% on steelmaking slowdown DAN reported FY22/23 guidance which points to a EUR3.5/3.7bn sales range (BNPPE EUR3.8bn) and EBITDA at EUR320/340m range (BNPPE EUR366m) in line with consensus (c. EUR325m of EBITDA). Danieli expects to report a similar net cash position in the EUR1.2bn/EUR1.3bn range (BNPPE EUR1.28bn) and importantly it expects the backlog to reach an historical high at EUR5.4bn/EUR5.7bn (vs EUR5bn in FY22) reflecting a still supportive book to bill above 1x in the plant making division. Due to the cyclical weakness of the steelmaking division (volumes now seen at -7% in FY23) we revise down our FY23 EPS estimates by 5%. OP reiterated (TP kept at EUR26) - cheap with structural growth trends and high returns We continue to believe that Danieli offers structural growth thanks to the exposure to the...
The H1 21/22 results were decent with a strong Steel-making segment that exceeded the group’s own expectations and a less performing Plant-making one. However, the order-book of the latter remained strong. The group confirms its targets for the current year. Our numbers look a bit conservative (we will upgrade these) but we believe that our current valuation (TP €23.8) probably does not need to be materially changed given the less favourable context (GDP growth and energy costs).
Mixed quarter with strong steelmaking performance but plant-making still weak Danieli reported H1 sales up 22.7% on the back of a very strong performance in the steelmaking division (+100%) where volumes were up +25% and price/mix reached a new high (+58%). On the contrary, the plant-making division posted a c. 7% sales decline. Group EBITDA grew 22% and margin was flat YoY at 7.4%. The plant-making margin stood at 7.4% (vs 7.3% in H1 20/21) despite the sales decline, while the steelmaking division posted a 7.4% margin (vs 7.8% in H1 20/21) with EBITDA almost double YoY (vs volume growth of 25%). Net cash was EUR935m in H1 (EUR986m in FY21), which excluded prepayments of around EUR380m (vs c. EUR90m in FY21). Strong orders in plant making with book-to-bill at 2.5x but EBITDA guidance down c. -10% Danieli reached a strong increase of the plant-making backlog (EUR3.44bn vs EUR2.9bn in June 2021) to a level not seen since 2010 thanks to an outstanding order intake (EUR2bn in H1, a level close to a full-year figure). This result was possible despite management removing EUR890m of Russian orders from the backlog (advance payments were removed from net cash) and Russia now accounts for just c. 2% of the backlog. However, the direct and indirect effect of the war has driven a downward revision of FY22 guidance. Plant making is guided 10% below previously, while steelmaking sales should be higher but with 10%/15% lower margins due to higher input costs. EPS revised down for FY22 but left unchanged for the following years Due to the likely stop/delay of works on Russian orders under execution we have revised down our FY22 estimates. However, the strong order intake achieved leads us to believe the lack of Russian orders should be offset by others in different regions, thus we do not make any changes to FY23e. OP reiterated (TP down to EUR26) - order strength to drive outperformance We reiterate our OP rating as order growth should remain strong...
2022 targets surprise on the upside Danieli published its 2020/21 Annual Report in which it disclosed its 2021/22 targets. Group revenues are expected to be between EUR3.2bn and EUR3.3bn (EBNPP EUR3.3bn) and EBITDA is expected between EUR310m and EUR340m (EBNPP EUR336m) implying a margin range on sales of 9.4% to 10.6% (10.1% EBNPP). The order backlog is expected in the range of EUR3.5bn to EUR3.8bn (EBNPP EUR3.4bn). Annual report highlights that advance payments are at a historical high The publication of the annual report shed light on the actual amount of the net advance payments (gross received advance payments minus advance payments given to suppliers) which are equivalent to EUR887m, much higher than the historical peak recorded in 2008 (EUR792m). The same argument applies also looking to gross advance payments. EPS estimates increased by 33%/34% in FY22/FY23 to incorporate better margins We have increased our EPS estimates by 33%/34% in FY22/FY23 to incorporate better expected margins in the plant-making division (EBITDA margin at 10% in FY22 vs 10yrs average of 9.5%) and in the steelmaking division (11.8% EBITDA margin, up 150bps YoY). OP reiterated (TP EUR32) - still cheap at 8.5x ex-cash P/E CY22 and c. 6x EV/EBIT We reiterate our OP rating as the business should undergo structural long-term profit growth thanks to the green capex wave from steelmakers and investments to expand the specialty steelmaking division. The stock continues to be cheap, trading at c. 8.5x CY22 P/E ex-adj. cash and c. 6x EV/EBIT and offers further optionality from the possible future conversion of savings shares into ordinary ones (our TP could increase by up to EUR5/share depending on the ratio of the conversion). We have only revised up our SOTP-based valuation by 7% as peers have derated and we revise down the adjusted net cash position following the higher net advance payments found in the AR.
FY20/21 results came in above expectations The current great shape of the steel market at large gives decent visibility over 2021/22 The green transition will be an important supporting factor for the Plant-making business
FY21 results above guidance and our estimates Danieli reported a strong set of results with FY21 EBITDA at EUR250m vs EUR210/220m guided in Oct by management (EBNPP expected EUR238m). The only negative was a -18% YoY decline in revenues in the plant making division in H2 FY21 (-14% in FY21) due to the phasing of some contracts which are at start-up/engineering phase. In the plant making division the EBITDA margin was 9.2% in H2 FY21 (vs 7.3% in H2 FY20) confirming an upward trend for margins. The steelmaking division benefited from the peak steel pricing and posted 74% sales growth in H2 FY21 (volumes +33%) and an EBITDA of EUR70m (11.9% margin in line with H2 FY20) close to peak level. Orders grew strongly in Jan-June 21 (+61%), recovering the poor performance in July-Dec 20 (-55%) and in FY21 they stood at c. EUR1.7bn (flat YoY). Group net cash reached EUR1bn (EUYR908m in H1 FY21) and excluding net advance payments of c. EUR450m net cash should be close to c. EUR550m (vs EUR238m in H1 FY21) mirroring a FCF generation of EUR300m in FY21. EPS revised up by 4% to 7% in FY22 and FY23 We have revised up our EPS estimates as we increased our sales forecasts in the steelmaking division thanks to favourable outlook for the new product range that Danieli launched recently after the c. EUR200m investment implemented. FY21/22 will be the first year of operation and initial indications on the sell-out are pretty positive. OP reiterated - TP raised from EUR25 to EUR30 We reiterate our OP rating as we believe that Danieli will benefit from the ongoing green capex wave from steelmakers and that the new capacity established in the steelmaking division may also surprise investors expectations on the upside. We are c.10% above consensus at EBIT level. We have increased our TP from EUR25 to EUR30 thanks to the higher estimates, the re-rating of the peers and the reduction of the liquidity discount (from 15% to 10%) as we likely see a simplification of...
Strategic List discontinued Owing to a change in analyst priorities, we will no longer be managing the strategic mid-cap list. Changes to the list Strategic Mid Caps: OUT - ALD, Danieli, Fila, Prosegur Cash, Rightmove, STJP, Teleperformance
DAN DAN TEP STJ ALD RMV FILA FILA CASH
We remove BFF Bank from the Strategic SMC List After the publication on BFF Bank today we are removing the stock from our recommended SMC list.
DAN DAN TEP STJ ALD RMV FILA FILA BFF CASH
H1 20/21 results showed a marked improvement in margins This should continue going into H2, given the current positive context in the steel market The group’s yearly target should be reached, at the least We will upgrade our forecasts with a positive impact on our target price
Strong margins fuel sustained operating results - steelmaking particularly strong H1 20/21 sales was down 8% due to plant making down -13%. Steelmaking was up 9% with volumes roughly flat YoY (-2%e). EBITDA grew by 46% to EUR95.5m (+EUR30m YoY) driven by the expansion of margins in the plant making division (7.3% EBITDA margin vs 4.1% in H1 19/20) reflecting better product mix. The steelmaking division performed well with 7.8% EBITDA margin (7.2% in H1 19/20). Net profit was EUR14.1m (vs EUR21m in H1 19/20) impacted by the depreciation of the USD (EUR53.5m negative impact from forex). At current forex DAN stated that they would have recovered EUR20m already. Net cash was EUR908m (EUR238m excluding net advance payments) vs EUR903m of FY20 (EUR255m excluding advance payments). Orders appear weak but inclusion of some contracts coming up Orders in the plant making division went down by c. -50% likely due to the delay between the trend of the steel spot price (bottoming out in mid-2020) and steelmakers'' capex decisions. The company mentioned some contracts signed that were not yet included in the backlog which should fuel a rebound in our view in the next half year. Fine-tuned FY21 estimates - we remain above consensus In light of the slower execution of the backlog than previously expected we have revised down our FY21 EPS estimates by 5%. We leave outer years unchanged. Our estimates remain 7%/9% above consensus EBITDA in FY21-23e. OP kept (TP raised to EUR25) - cheap margin recovery story and green capex beneficiary We reiterate the OP rating as we believe that Danieli should exhibit a 20% EPS CAGR in 2020-23 and valuation is still cheap trading 1x EV/CE (with double-digit ROCE next fiscal year). The next wave of green capex should fuel a strong recovery of orders with also sustained margins as the level of technologies supplied should improve. We have shifted our valuation to FY23; our TP moves from EUR24 to EUR25. Conversion of...
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