Rosenbauer confirmed at HOLD, TP EUR 44 - Brimming order books, de-leveraging key to unlock value
Rosenbauers prelim. FY 19 results were largely in line with its guidance and fractionally below RCBe. Early in the year, the targets for FY 20 remained vague but the indication of further growth and better margins were consistent with expectations. Order backlog of EUR 1.15 bn is at an all-time high and thus the foundations for further expansion are in place. At the same time, we think that the release did not bring material new aspects to the investment case and we confirm the HOLD rating but have raised the target price to EUR 44 from EUR 40.5. As we have kept our earnings forecasts unchanged throughout FY 21e, the higher valuation results from a lower net debt estimate for YE 20-21e (derived from the assumption that NWC requirements can be largely stabilised on the back of the progressing roll-out of the new ERP system) and a 10 bps lower WACC. We assume that FCF in FY 19e was below the indication provided with the 3Q results and thus expect a year-end figure of EUR 299 mn (about its current market cap or ~4x EBITDA, YE 20e ~3.5x). We acknowledge that the groups valuation does not look demanding at face value with P/Es of 10.5x and 8.8x below the longer-term medians of about 13x and 11.5, respectively, but point out that current FY 20-21e EV/EBITDA multiples of 7.8x and 7.0x are about in line with the 7-year medians of 8.2x and 7.2x, respectively. Our long-standing view that de-leveraging on the back of working capital reduction (also entailing higher ROCEs) is the key catalyst remains unchanged.Rosenbauer International is a holding company. Co. through its subsidiaries is engaged in the manufacture, sale and distribution of mobile fire protection and civil defense solutions. Co. maintains five business segments: vehicles, aerials, fire and safety equipment, service and spare parts/others, fire fighting components. Co.'s product portfolio includes a range of municipal fire fighting vehicles and aerials built to both European and the United States standards, series of aircraft rescue and fire fighting vehicles, industrial fire fighting vehicles, fire and safety components and equipment. Co. provides services and spare parts, instruction and training programs for its products.
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