da Intermonte – AVIO company research report

Buon pomeriggio, di seguito e in allegato inviamo il company research report relativo ad AVIO a cura di Intermonte. Rimaniamo a disposizione per ulteriori informazioni. Un caro saluto, Lucrezia Pisani M. +39 347 6732 479
Short-term clouds, but positive signs for the longer term
* 2Q22 broadly in line: the company has reported quarterly results that came in slightly above our expectations at operating level, with numbers affected by activity to prepare for the inaugural flight of Vega C and the rise in energy costs. Revenues came in at Eu68mn, below our estimate of Eu72mn and down 9.3% YoY. The fall in the top line was due to the focus on the activity linked to the Vega C maiden voyage, which has taken resources away from other activities, an effort more than justified by the importance of the milestone. Adj. EBITDA stood at Eu4.4mn, above our estimate of Eu3.6mn, but down 26% YoY mainly due to the sharp rise in energy costs, leading to adj. EBIT of Eu0.4mn (vs. our Eu-1.9mn estimate), broadly in line with last year thanks to lower D&A. Finally, the NFP was positive at Eu40.9mn, above our estimate of Eu35mn.
* 2022 guidance cut because of rising energy costs: along with the release, the company also updated its guidance for 2022, confirming targets for the order book (Eu870-920mn) and revenues (Eu330-350mn), but cutting the reported EBITDA target (Eu17-25mn from Eu24-30mn) to account for the higher-than-previously-expected impact of energy costs, pending mitigation measures (by Italian Government, ESA…) that are not included in the target. As a consequence, net profit has also been rebased (Eu-2/+3mn from Eu5-10mn), now also incorporating one-off taxation effects.
* 2022/23 estimates down double-digit, limited impact in the longer term. We are aligning our 2022 estimates with the mid-point of the new guidance provided by the company, thereby cutting adj. EBITDA by 19.5%, while leaving top line unchanged. Given the lack of visibility on the evolution of energy prices in the near future, we are also going to take a more cautious stance on 2023 profitability in light of the limited possibility of revising the terms of existing contracts, cutting adjusted EBITDA by about 16% (margin reduced by 1.7pp). For the following years, however, the cut is much more limited and assumes a gradual return to normal as of 2024. We note that our estimates only partially include the substantial upside that could derive from 1) the NRRP funds destined for the aerospace sector, 2) the ESA funds that will be allocated in the ministerial conference that will be held at the end of the year and 3) the increase in defence spending following the worsening of the geopolitical scenario in the wake of the Russian invasion of Ukraine.
* OUTPERFORM confirmed; target Eu11.7. While profitability estimates could potentially suffer in the short term from low visibility due to energy price trends, we believe that over the longer term Avio is well placed to seize the opportunities materialising in the highly promising small satellite launchers market, which should continue to enjoy sustainable growth in the coming years thanks to demand for increasingly accurate, flexible, and reliable launchers. The materialisation of the NRRP, ESA and defence orders detailed in this report could translate into material upside compared to current estimates, providing significant potential upside to our valuation. Our valuation model yields a target price of Eu11.7, down from Eu12.7 following the cuts we have made to our estimates and the updated WACC (8.9% from 8.2%) following the increase in the risk[1]free rate adopted in our model (4% from 3%)