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Research, Update 8 Dec 2022

UPDATE – 09.10.2022

During the first six months of the FY22A fiscal year, the Company devoted significant efforts and resources to implement a review of the strategy setting, which now provides for a simple corporate structure without the division of activities into business units and with greater efficiency and cost optimization. Net of these interventions, algoWatt recorded a value of production equal to € 9.27 million, vs € 9.77 mln in 1H21A. EBITDA recorded in the first six months of the year amounted to € 0.41 million, a sharp increase compared to the 1H21A figure of € 0.02 million. EBIT also improved compared to the negative value of 1H21A, equal to € -2.60 million, however, reaching a negative value of € -1.70 million. Net Income was also negative, equal to € -1.83 million (€ -3.74 in 1H21A). 

In light of the results published in the semiannual report for 1H22A and the recent publication of the business plan, we largely confirm our estimates for both the current year and the coming years. In particular, we estimate FY22E value of production equal to € 33.00 million and EBITDA of € 12.00 million, corresponding to a marginality of 36.4%. For subsequent years, we expect the value of production to increase up to € 33.25 million (CAGR 20A-24E: 13.15%) in FY24E, with EBITDA of € 6.25 million (EBITDA margin of 18.8%), up from € 3.32 million in FY21A (EBITDA margin of 14.5%).

We have conducted the valuation of algoWatt 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 also a specific risk of 2.5%) provides an equity value of € 90.2 million. The equity value of algoWatt using market multiples is € 50.8 million (including a discount of 25%). The result is an average equity value of approx. € 70.5 million. The target price is € 1.50 (prev. € 1.40), BUY rating and MEDIUM risk.

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