Ori­gi­nal-Re­se­arch: Cembre S.p.A. – (von GBC AG): BUY

„Full steam ahead“ Strong First Half 2023: Suc­cess pa­ves the way for fu­ture growth of the spe­cia­list for the rail­way in­dus­try

Cembre stands as the fo­re­most Eu­ro­pean ma­nu­fac­tu­rer spe­cia­li­zing in elec­tri­cal crimp­ty­pe con­nec­tors and the ac­com­pany­ing in­stal­la­ti­on tools. Over the past two de­ca­des (2003–2022), the Group has ex­hi­bi­ted im­pres­si­ve growth, achie­ving a re­mar­kab­le 6.5% Com­pound An­nu­al Growth Rate (CAGR), sur­ging from € 59.87 mil­li­on in 2003 to an im­pres­si­ve € 198.80 mil­li­on in 2022. The most re­cent five ye­ars (2018–2022) have seen even more im­pres­si­ve ex­pan­si­on, with a CAGR of 8.4%. In ad­di­ti­on to its re­mar­kab­le growth, Cembre has main­tai­ned a strong com­mit­ment to its share­hol­ders by con­sis­t­ent­ly pay­ing di­vi­dends. Over the past 20 ye­ars, the com­pa­ny has bo­as­ted an avera­ge di­vi­dend pay­out ra­tio of 48.6% and an avera­ge di­vi­dend yield of 3.7% (2003–2022). No­ta­b­ly, in the last five ye­ars, the avera­ge di­vi­dend yield has in­creased to 4.1% (2018–2022). At the mo­ment Cembre’s pro­duct port­fo­lio com­pri­ses an ex­ten­si­ve of­fe­ring of over 18,000 end pro­ducts, which are dis­tri­bu­ted to a glo­bal cli­ente­le of ap­pro­xi­m­ate­ly 5,000 in­di­vi­du­al cus­to­mers. The top ten cli­ents‘ purcha­ses make up ap­pro­xi­m­ate­ly 20.3% of the con­so­li­da­ted tur­no­ver, re­flec­ting the company’s di­ver­si­fied cus­to­mer base and glo­bal reach.

The key ope­ra­ting fi­gu­res for the first half of 2023 show that the com­pa­ny was able to con­ti­nue on its growth cour­se, achie­ving dou­ble-di­git growth in both tur­no­ver and ear­nings. The first half year 2023 fi­gu­res show­ca­se a ro­bust per­for­mance with Group sa­les rea­ching € 117.64 mil­li­on, mar­king a 12.7% year-on-year in­crease (PY: € 104.36 mil­li­on). In the first half of 2023, the company’s EBITDA achie­ved an im­pres­si­ve € 38.6 mil­li­on (PY: € 30.51 mil­li­on), mar­king a sub­stan­ti­al 26.7% year-on-year growth. The EBITDA mar­gin also de­mons­tra­ted si­gni­fi­cant im­pro­ve­ment, ri­sing from 29.2% in the first half of 2022 to 32.9% in the first half of 2023.

Cembres’s stra­tegy for re­ve­nue growth has been in­stru­men­tal in pro­pel­ling them­sel­ves for­ward. They have fo­cu­sed on con­ti­nuous in­no­va­ti­on by de­ve­lo­ping new pro­ducts and re­ne­wing their pro­duct ran­ge, dri­ven by in­ten­si­ve R&D. This stra­tegy also in­vol­ves im­pro­ving dis­tri­bu­tor chan­nels in for­eign mar­kets and ex­pan­ding their pre­sence in high-po­ten­ti­al re­gi­ons, such as the United Sta­tes and Ger­ma­ny. Fur­ther­mo­re, they con­cen­tra­te on high­growth po­ten­ti­al pro­ducts and ma­na­ge cos­ts ef­fi­ci­ent­ly th­rough eco­no­mies of sca­le and pro­cess in­no­va­tions. In­vest­ments in high-tech, high­ly au­to­ma­ted ma­chi­nery have bols­te­red their ma­nu­fac­tu­ring ca­pa­bi­li­ties. In sum­ma­ry, Cembre’s com­pre­hen­si­ve ap­proach has led to re­mar­kab­le re­ve­nue growth, com­bi­ning in­no­va­ti­on, mar­ket ex­pan­si­on, cost ef­fi­ci­en­cy and ad­van­ced tech­no­lo­gy for sus­tained suc­cess.

Alt­hough the company’s fo­re­cast is kept va­gue due to the pr­e­vai­ling un­cer­tain­ty in the face of on­go­ing geo­po­li­ti­cal ten­si­ons, in­creased in­fla­ti­on and ri­sing in­te­rest ra­tes, the com­pa­ny ex­pects to grow its con­so­li­da­ted tur­no­ver in 2023 and an­ti­ci­pa­tes a po­si­ti­ve con­so­li­da­ted eco­no­mic per­for­mance. For the 2023 fi­nan­cial year, we ex­pect tur­no­ver to reach € 220.10 mil­li­on, a ro­bust in­crease of 10.7% year-on year. This growth is ex­pec­ted to con­ti­nue in 2024, with a pro­jec­ted tur­no­ver of € 245.55 mil­li­on, re­pre­sen­ting a fur­ther in­crease of 11.6%. Our EBITDA fo­re­cast for 2023 is € 65.10 mil­li­on, fol­lo­wed by an in­crease to € 73.50 mil­li­on in 2024.

Ba­sed on our va­lua­ti­on mo­del, we have es­tab­lished a tar­get share pri­ce of € 42.00. Gi­ven the sub­stan­ti­al up­si­de po­ten­ti­al, we as­sign a Buy ra­ting.