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MOTODYNAMICS | In growth gear

Leading auto/moto company in Greece diversified across segments – Motodynamics operates as the distributor for Yamaha in Greece, Bulgaria, and Romania, and for Porsche in Greece. It also holds the franchise for SIXT rent-a-car (RaC) in Greece and engages in the sale of used cars. Motodynamics’s diverse portfolio allows for both year-round revenue streams and seasonal income, thus positioning the group advantageously to capitalize on the positive domestic macro prospects (affecting all segments), growth in inbound Greek tourism (propelling RaC and marine), urbanization dynamics (e.g. more traffic underpinning the Yamaha moto business) and the retracement of car/moto registrations towards more normal levels.

Solid track record of revenue growth; profitability reset at EBIT levels near €18-20m – Motodynamics has delivered an impressive c23% sales CAGR over 2018-2023, growing its revenue base to €170m in 2023 from just €55m in 2017. The group has managed to sustain strong 2-digit growth in all years except for 2020, when the operations were affected by the pandemic. It enjoys industry-leading gross margins, although at EBIT level there is certainly scope for improvement as the business grows and enjoys scale benefits. Thanks to organic growth and the acquisition of Lion Rental (franchisee of SIXT in Greece), Motodynamics has seen its EBIT being reset from c€4m in 2019 to a whopping c€18m in 2023.

Record 2023; c11% EBIT CAGR over 2023-26e – Following a record 2023, with revenues +29% and EBIT +14%, we expect 9-10% annual revenue growth in the coming years supported by healthy Greek tourism prospects, fleet expansion, increasing car/moto registrations and market share gains. This will filter through to c11% constant annual growth in EBIT, quite a compelling proposition we reckon.

Significant investment in RaC fleet in recent years but balance sheet remains healthy; focus on returns – Despite the heavy fleet investment (c€61m since 2019), the group has managed to grow without overly gearing the balance sheet (net debt / EBITDA at c1.1x in 2023, group net debt just 70% of the vehicle book value). Management also seems quite focused on generating sustainably elevated returns on capital, having delivered ROIC (pre-tax) near 30% in both 2022 and 2023. Looking ahead, we expect net fleet investments – i.e. capex for fleet growth and replacement net of the fleet sold – to be in the €21m-€22m area as the group expands its short-term fleet by some 2.1K vehicles (c+50% vs 2023 levels). As such, we anticipate FCF to stay negative in 2024 given the ongoing investments but envisage inflection from 2026e onwards. This will help Motodynamics sustain post-tax ROICs in the high teens on our estimates.

Valuation – Motodynamics has lost c10% in the last year outperforming its international peers but lagging the return generated by its closest peer Autohellas (+7%) and other Greek non-financials. As such, the stock is trading at 40% discount to its international peers and c15% discount to Autohellas. Our DCF valuation predicated on a 10.2% WACC yields a €4.0 PT, placing the stock at a conservative 4.6x 2024e EV/EBITDA, still >25% discount vs the broad peer group. We thus initiate coverage with a Buy rating.