Initiation of Coverage, Research 19 Jul 2023
INITIATION OF COVERAGE – 18.07.2023
| Green Oleo SpA (hereinafter also referred to as “Green Oleo” or “the Company”) is an Italian B2B company with a century-long history, which ranks among the leading players in European oleochemical production. The Company, headquartered in Cremona (Lombardy), was founded in 1925 with the aim of becoming a market leader in oleochemical products from renewable sources, satisfying every type of need expressed by its customers. The Company’s ownership, which has been in the hands of the Buzzella family since 2012, defines Green Oleo as a “green chemical” company, whose business involves the processing of wastes (by-products) from the industrial production of meat and vegetable oils (especially olive oil), which are no longer usable in the food industry. In Green Oleo this waste, otherwise destined for disposal, becomes precious raw materials which, through a series of chemical processes, are ennobled and then sold to end-use companies. The main families of oleochemical products handled by Green Oleo are distilled fatty acids, glycerines and esters, but also stearic acids (or stearins), oleic acids, partially hydrogenated and polyunsaturated fatty acids and fatty acid derivatives (such as soap flakes). The Company is also active in the business of extracting squalene, a fatty acid found both in shark liver oil and in some vegetable oils, particularly olive oil. This raw material is known for its emollient and antioxidant properties and is highly sought after, especially for the production of cosmetics. Using the average between the EV/EBITDA and EV/EBIT market multiples of the two panels, the equity value of Green Oleo amounts to approximately € 128.8 million. To this value, we have applied a discount of 25.0% so as to include in the price the lower liquidity that will presumably characterise the Green Oleo stock compared to its peers: this results in an equity value of € 90.1 million. The result of the two valuation methods returns an average equity value of 105,3 mln. The target price is equal to € 3,25, rating BUY e risk MEDIUM. |