Diversification helped in a tougher environment

Q2 23 results were in line In Q2 there were no surprises from the release. Sales (of EUR 168.9m) were in line with last year. We estimate organic performance was flattish with positive pricing (up LSD) almost offsetting slightly negative volumes. In the quarter, we saw a divergent performance across businesses with strong Air conditioning (ie HP) and Industrial cooling, helping to cope with weak special applications (ie appliances) and still subdued (commercial) refrigeration. EBITDA was stable

Preparing for the next growth chapter

With momentum improving in H2 and top-line accelerating in 2024/25e, we see LU-VE as well-positioned to deliver HSD sales CAGR with expanding margins. Market share gains in the US and booming demand for heat pumps in EU should support the growth story. LU-VE trades at c12x 2024e EBIT, a c40% discount to its HVAC/R peers. EU heat pump growth is far from cooling... LU-VE looks best positioned to benefit from the EU push on building decarbonisation. We forecast the EU business to grow at HSD CAGR,

Growth to bounce back in H2

Stable Q1 despite a challenging comparison base LU-VE posted a soft start in Q1 mainly due to a tough comparison base. Sales of EUR 151.4m grew by c2%, mainly driven by Air conditioning (+75%) more than offsetting a general weakness of the other applications. Adj. EBITDA was stable YoY at EUR 19.2m (overall in line with BNPPe) with a 12.7% margin (ie same level as last year). Price/mix and volumes more than offset the cost inflation. That said, the result was impacted by EUR 1.9m one-offs (due t

Visible growth ahead

4Q 22 overall in line with orders starting strongly in 2023 In FY22 LU-VE posted 2% beat on (Reuters) consensus EBITDA with results overall in line with our estimates. In Q4 22, the company generated c.13% sales increase and we estimate organic growth was HSD vs c.17% BNPPe due to lower than expected volume and pricing contributions. In Q4, adj. EBITDA was almost in line and came in at EUR c.17m, implying a 11.1% margin which is not far from last year (11.7%). FCF generation was slightly below o

Four themes, four plays

With improving macroeconomics and reduced political noise, we selected four names across the Italian Sponsored Research space - ALMAWAVE, SALCEF, CEMENTIR and LU-VE - that offer a combination of sound growth, potential margin expansion, healthy BS and MandA momentum. Better macro and lower country risk brings Italian Mid and Small caps back on the radar Following a challenging past year for Italian MidandSmall Cap equity performance, a more benign macro backdrop, easing consumer concerns and ea

On a solid growth path

9M 22 results came in line In 9M 22, LU-VE posted a set of results in line with our estimates. Sales increased by c.28% YoY at constant perimeter. We estimate a DD increase in volumes and almost 20% contribution from prices. It is worth highlighting the strong performance of the Air Conditioning application (with heat pumps up by 150%), while the US business doubled. Looking at profitability, the reported EBITDA of c.EUR 60m was substantially in line with our estimate, despite EUR 2m of incremen

A sustainable growth dynamic

Megatrends feed long-term growth prospects... Yesterday LU-VE hosted an Investor Day, shedding light on the megatrends that are likely to support the group''s growth ambitions. We discussed these dynamics in our latest in depth note (LU-VE: Cold Rush). Growth and increasing sustainability in cold chain and heating electrification are the main factors supporting LU-VE''s organic development in the near future. By region, the EU remains at the core as it is benefitting from the increasing penetra

Feedback from investor meetings: cyclical fears prevail

Elections confirm polls, with the right-wing coalition winning a majority of seats The Italian elections resulted in the right-wing coalition led by Giorgia Meloni of the Brothers of Italy winning a majority of seats in both lower and upper chambers, though far from the 2/3 needed to change the constitution. The new government will officially start in the week of Oct 10th, and after an initial phase of selecting ministers, it can begin effectively governing from early November. Thus, we may ne

Profitability fuelled by pricing and growth

H1 22 results showed strong profitability In H1 22 sales grew by +39.9% YoY with organic figure of c.36% (BNPPe) which was the result of c.25% increase of the price list, while the rest came from volume/mix. Profitability was well ahead of our number. LU-VE posted 13.2% EBITDA margin (vs BNPPe of 12%), implying EUR 42.1m of EBITDA (+c.59% YoY) which was 12% above our estimate. Pricing power continues to protect profitability with the positive impact of the price hikes and volumes, more than offs

Between fear and opportunity in Italian SR

Though macro fears are looming, we also find opportunities. Of the 18 stocks we cover under Sponsored Research (SR) agreements, we have selected four companies to navigate the next few months: LU-VE, Orsero, Hera and Sesa, offering a combination of structural growth, no/low gas/energy risk, cheap valuation, upside to consensus and specific catalysts (MandA or self-help). Gas price is the key issue in Italy - screenings With natural gas and electricity prices being the biggest concern impairing

Cold Rush

LU-VE benefits from two long-lasting trends, namely the development of a stronger, more sustainable cold chain and booming heat pumps. These two combined forces have pushed its growth above other component makers (e.g. CAREL, BELIMO) and should support further rerating. Earnings momentum remains strong: 2022-24e adj. EPS up by c.14% The growth story is far from cooling and our analysis suggests that demand is accelerating across LU-VE''s end-markets. In this note, we take the opportunity to refr

Growth and pricing power surprise positively

Strong margins in H2 21, even if cash generation suffered from inventory build-up In Q4 21, organic sales growth was close to 30% (already disclosed in January). In H2 21, EBITDA margin strongly expanded to 13% (vs 11.3% in H2 20) despite higher selling prices almost completely offsetting the higher sourcing costs (''only'' EUR0.5m net negative impact at EBITDA level). In H2 21 LU-VE reported a c. 14% price increase. Net debt was EUR122m, slightly higher than previously expected (EUR101m) due t

Ongoing solid trends in 2021

H1 results show very strong organic growth and margin expansion LUVE posted 19.4% organic sales growth (16.8% reported), of which 15.4% was volume growth and 4% was driven by price hikes reaching a level 5% above H1 19 on an organic basis. Growth was driven by the BU Components with +29% while Cooling systems grew by +6%. Refrigeration grew by 26% and special applications by 35%, while air conditioning was flat and industrial cooling declined by -18%, impacted by slowing ''district heating'' pr

Good Q1 sales

Q1 21 sales were solid and the backlog mirrors an underlying acceleration ahead LU-VE reported last week that sales of products increased by +4.2% YoY in Q1 2021 (in Q1 20 organic growth was flat, thus representing a tough basis of comparison due to a very strong Jan-Feb 2020). More importantly the backlog was up +12.3% YoY (in Q1 20 it grew organic by c. 19% YoY) and reached a new high of EUR99.5m. This may be due to the recovery of underlying demand and the increasing orders received by the c

Good results and still supportive top-line trends

Good FCF and EBITDA in 2020 even if DandA expenses were slightly higher than expected LU-VE had previously reported an organic sales decline of -2.4% for FY20. The reporting of full PandL showed a good adjusted EBITDA margin (11.4% vs. 11.1% expected). However higher DandA than previously expected led to an adj. operating margin slightly weaker than expected (3.9% vs 4.2%e). A strong NWC management allowed net debt to reduce from EUR126.2m in H1 20 to EUR106.8m (vs EUR111m expected). DPS will b

Supreme (SUP LN) - Initiation of coverage

FY24 Interim results: A record H1 performance delivered revenue growth of 62.5% to £105.1m (H1 FY23: £64.6m), with growth across all divisions: Batteries +1.4%, Lighting +21.8%, Sports Nutrition & Wellness +17.5%, Vaping +32.5% (ex- ElfBar) and Branded Distribution +798.9%, which includes revenue of £26.4m from the ElfBar distribution opportunity, commenced in June. Adj. EBITDA of £15.2m is +88.0% (H1 FY23: £8.1m) benefitting from higher sales, and operational efficiencies. Adj. PBT of £12.6m is

Brickability Group - A diversified and resilient model

Today’s interims are in line with the recent trading update (11th October) and as such we make no changes to forecasts. Revenue of £324.8m represents a LFL decline of 14%, with EBITDA of £25.6m (H123: £25.5m). This is a strong performance, against what is a challenging market backdrop and underlines the benefits of its diversified operating model and focused strategy. We therefore continue to be surprised at the weakness of the share price, especially in the context of a broader peer group. Putt

Epwin (EPWN LN) - Confirmation of FY23 estimates and buyback announced

Epwin has released a brief trading update confirming that it is on track to meet FY23 estimates. It has also announced its intention to start a buyback, indicating the Board’s confidence in the business going into FY24, despite the volatile operating environment. Zeus leave profit estimates unchanged across the forecast period. This is a continuation of the performance over the last few years, the business has met or beaten consensus numbers since FY20, has not raised equity and managed its bala

Supreme Plc+ (SUP, House Stock at 110p) - Exceptional H1 - 'significantly' raised FY24F guidance

Morning Note – 28 November 2023

Strong H1 results raise full year outlook

The H1 outcome was as indicated in the recent (18 October) Trading Update. Group guidance for the full year is now raised: from revenue of £195m - 205m to £210m - £220m (ED estimate was £204.2m); (adj.) EBITDA from £28m - £30m to £32m - £35m (ED estimate was £29.0m). From incremental EBITDA of c.£4.5m, c.£1.5m arises from core operations and c.£3.5m from the Elf distribution agreement, which supplies retailers including Tesco, Morrisons, One Stop and WHSmith. A series of initiatives – branding

Epwin Group+ (EPWN, House Stock at 67p) - Trading update and share buyback

UK-Listed Energy Sector: Review of the UK oil and gas landscape – why the country needs it, current policy and tax

The front of this note takes a look at the UK oil and gas sector, why domestic production is advantageous, what the main political parties think, and what could happen going forward. The latter part contains a review of the companies in our coverage – some that are UK centric, which give exposure to the note’s wider theme, and others that are focused elsewhere.

Making positive progress on all fronts

Plant Health Care - Outperforming the unprecedented destocking

Plant Health Care has announced a trading update, noting that market conditions in the wider agriculture market have deteriorated but that it continues to outperform the wider market with growth in all regions except the US. In the US, aggressive inventory destocking means orders that were expected in 4Q FY23 are now projected in early FY24. Plant Heath Care therefore now anticipates revenue for FY23 to show flat to modest growth over FY22 (which compares to the crop protection sector where reve

James Cropper + (CRPR, House Stock at 725p) - Directorate changes

Quadrise+ (QED, House Stock at 1p) - AGM update

SP Angel Morning View: Iron ore rises to $135/t as steel inventories fall

LIBERUM: SigmaRoc: Once in a lifetime

EQTEC - Collaboration Framework Agreement

EQTEC has entered into a Collaboration Framework Agreement with Tresca Energia, a Spanish based engineering and infrastructure group. The agreement looks to deploy EQTEC’s solution in developing advanced biofuels and includes an identified project in Castilla y Leon for the conversion of 50,000 tonnes of biomass per year into renewable natural gas. Whilst the project is currently going through the feasibility stage, there has already been early interest with regards to both financing and offtake