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Autohellas | Leveraging on tourism drive

Strong 9-month picture with EBIT growing 16% – Autohellas reported a strong set of 9-month results with revenues rising 34% yoy or 20% organic (namely ex Portugal) and EBIT up 16% yoy, despite elevated M&A-related costs (vehicle fleet costs). Net profit grew by a lower 4% yoy due to the impact of higher financial expenses (double last year levels). All three reported segments, namely Greece rentals, International rentals and Auto trade, delivered revenue growth, with the core segment, namely rental revenues posting c40% total growth yoy (boosted from the addition of Portugal) and +7% organic (+6% Greece and +13% lfl International).

Healthy demand and M&A drive 2023e – Our 2023e forecasts picture the healthy demand trends, especially given the better-than-envisaged performance of the recently acquired Portuguese Rent-a-Car business. We model rental revenues of €445m (+30 yoy, or +7% organic) and Auto-trade revenues of €520m (+23% yoy) in 2023, calculating total group sales of c€965m (+26% yoy, or +16% organic). On the cost front we pencil in an EBITDA margin of 27% (-2.5pps yoy erosion) for the current year, given elevated vehicle prices and acquisition-related costs, leading our EBITDA forecast to €261m (+15% yoy). We have also included profit from the FCA JV (51% stake) for the May-Dec 2023 period (c€2.5m). These are partly offset by the elevated net financial expense assumption, resulting in a 2023e net profit estimate of €71m, -8.6% below the record €78m in 2022.

High single digit EBIT CAGR profile looking ahead – Looking post 2023e, prospects for Autohellas look promising, with the group set to benefit from structural growth avenues (tourism, LtR penetration), M&A synergies and cyclical drivers (growing new cars mkt, c2% GDP growth in Greece). Following mid-single digit EBIT growth in 2024e (on +3% sales) given the tough comps, we envisage high single-digit EBIT growth looking further out driven by operating leverage, with EBIT margins reaching 14% by 2026e.

Balance sheet optionality despite high capex envelope – Autohellas enjoys a healthy balance sheet, with low leverage (net debt/EBITDA c2x) underpinned by its cash flow generation capability (>65% OCF conversion). Autohellas’ debt is steered to its vehicle fleet, while in the past year it secured c€150m in RRF funding for a ‘green’ fleet and a €200m 5-year bond to steer towards its fleet and also refinance debt. That said we estimate net fleet capex between €160-170m annually, more than covered by >€180m OCF. This means there is ample room for the group to step up cash returns or to pursue more aggressive expansion. In the meantime, Autohellas has been able to deliver top-notch returns (ROE>20% in 2022) while reinvesting in the business, thanks to its high margins, lean structure and network/scale advantages.

Valuation – We value Autohellas with a DCF model, using a c10% WACC, which we find appropriate in the current elevated rate environment. We come up with an intrinsic value in the range of €13.4-€19.1, with the baseline value of c€16/share effectively valuing the stock at 4.7x 12mth fwd EV/EBITDA, namely a c25% discount vs the median of peers. We believe the stock has room to move higher in the valuation spectrum as its acquisitions bear fruit and it scales up further.