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Research, Update 8 Dec 2022

UPDATE – 04.10.2022

Convergenze recorded a value of production as of 1H22A of € 12.66 mln, up 40.7% from the 1H21 value of € 8.99 mln. The Company’s EBITDA, equal to € 0.63 mln, decreased 53.3% compared to € 1.35 mln 1H21A, with EBITDA margin decreasing from 15.0% in 1H21A to 5.0% in 1H22A; impacting the figure was the negative marginality of the BU Energy, which suffered from rising energy costs, while the marginality of the BU TLC increased. EBIT also decreased, amounting to – € 0.27 mln, due to depreciation and amortization resulting from increased investments on FTTH infrastructure. Net Income is negative at – € 0.43 mln, compared to the 1H21A figure of € 0.41 mln.

In light of the results published in the half-yearly report for 1H22A, we modify our previous estimates both for the current year and the coming years. In particular, we estimate the FY22E value of production equal to € 23.30 million and EBITDA of € 2.45 million, corresponding to a marginality of 10.5%. For subsequent years, we expect the value of production to increase up to € 30.00 million (CAGR FY21A-FY24E: 16.4%) in FY24E, with EBITDA of € 4.55 million (corresponding to an EBITDA margin of 15.2%), up from € 1.82 million in FY21A (corresponding to an EBITDA margin of 9.7%). 

We have conducted the valuation of Convergenze’s equity value based on the DCF methodology and market multiples of a comparable companies sample. The DCF method (which in the calculation of the WACC includes for prudential purposes a specific risk of 2.5%) provides an equity value of € 65.3 million. The equity value of Convergenze using market multiples is equal to € 24.7 million (with a 25% discount). The result is an average equity value of € 45.0 million. The target price is € 6.00 (prev. € 6.20), BUY rating and MEDIUM risk.

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