Updated outlook emphasises organic growth ambitions (Chargeurs)
Updated outlook emphasises organic growth ambitionsEPS CHANGE
CHANGE IN TARGET PRICE€ 28.5 vs 28.2 +1.15%
Our target price is virtually unchanged following the review of our assumptions post the H1 results. The valuation boost from our estimated NAV, thanks to the inclusion of a fifth division (CHS), was counterbalanced by the slightly lower DCF and multiple-based valuation due to lower earnings expectations in FY21-22.
Nonetheless, we are encouraged by the strategic shift, prioritising organic growth above bolt-on acquisitions. As a result, we have removed our assumption for a future capital increase of €100m, as we believe Chargeurs' organic growth ambitions will be primarily funded by internal resources. We see this change, made viable (at least in part) by the accomplishments made in H1, as a clear positive for shareholders.
CHANGE IN EPS2020 : € 1.70 vs 0.81 +110%
2021 : € 0.69 vs 1.44 -52.0%
Our FY20 EPS estimate sees a major upgrade after the inclusion of the superb H1 results led by Chargeurs Healthcare Solutions. We expect H2 2020 and FY21 to be challenging for the group's historical businesses, CFT-PCC and CLM in particular due to their exposure to the weakened fashion and luxury sectors. In spite of this cautious scenario (in our view), we stand clearly above the €750m in revenues and €60m in operating profit guidance provided by management for 2020. We also see potential upside on a relatively stronger H2 for CPF, which proved quite resilient in H1.
CHANGE IN NAV€ 31.2 vs 26.6 +17.5%
Our NAV/SOTP valuation is mainly impacted by the inclusion of Chargeurs Healthcare Solutions, a division that was entirely built-up with internal resources, explaining the significant valuation boost. In addition, the removal of an expected capital increase resulted in a mechanical increase to our NAV per share due to the decreased equity dilution. We still expect equity capital to increase by c.150k shares per year on account of dividends that can be electively paid in shares.
Chargeurs SA is a France-based company, which provides customizable specialty material solutions. The Company and its subsidiaries operate in four sectors: Protective Films, Fashion Technologies, Museum Solutions and Luxury Materials. Protective Films designs, produces and markets technical solutions to protect the quality of steel, aluminum, plastic or other surfaces during the transformation process, as well as film application machines. Fashion Technologies produces and markets linings for clothing. Museum Solutions includes the industrial divisions Senfa, specialized in the functionalization of technical textiles, and Chargeurs Creative Collection, specialized in the provision of services to cultural institutions. Luxury Materials manufactures and markets combed wool ribbons. The Company is active globally.
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