SanLorenzo Business Plan 2023-2025
SanLorenzo $SL.IM is an Italian firm that designs and creates bespoke luxury yachts. It excels in the 30–40-meter yacht market, where it has been a dominant player for the past decade. Three years after the IPO in 2019, SanLorenzo has had impressive growth in all the metrics, growing revenues at 17.6% CAGR and almost multiplying by three the net income. In our investment thesis, we already highlighted the great positioning to capture the booming moment of the yacht industry.
SanLorenzo presented today their results for 2022 and provided their 2023 – 2025 business plan. We already commented the FY22 results. So, we will briefly review them and will focus on the business plan for 2023-2025, which has provided meaningful insights on the future of the company.
Quick recap of Sanlorenzo 2022 results
- Revenues: €740.7 million, a 26.4% increase over 2021’s revenues.
- EBITDA: €129.6 million vs in 2021, with a 17.5% margin vs 13.3% in 2021.
- Net profit: €74.2 million at a 10% margin vs €51 million at an 8.7% margin in 2021.
- Net cash position: €100.3 vs €39 million.
- Net backlog: €1.1 billion, 21.7% increase compared to 2021. With a larger share of the backlog for the years beyond this one.
Sanlorenzo Business plan 2023-2025 and Guidance for 2023
As they advanced in the Q&A of the call for the FY22 results, they aim to continue growing at a high-single digit while expanding considerably their margins, reaching at least 19.5% in EBITDA margin in 2025. In fact, Massimo Perotti, the CEO, has stated that the real target for them is 20%.
The management plans a similar breakdown in revenues by divisions, except for a higher share by Bluegame. The company is enlarging the average length of yachts sold in all the segments, and intends to increase prices by 3% every year.
Despite a Capex of around €50 million, from which €25 will be to enlarging the operating capacity, they expect to reach a net financial position of between €185 and €205 million, this means a €100 million cash generation in the three-year period. In 2022, they had a 79% industrial capacity utilization, which does not give enough room for growth without further investment. They expect a 25% increase in production capacity for 2025.
For 2023, the company envisages:
- Revenues: €810-830 million (11% growth)
- EBITDA: €150-155 million
- EBITDA margin: 18.5-18.7%
- Net profit: €84-86 million
- Investments: €48-50 million
- Net financial position: €118-128 million
Just making some quick numbers, with an 8% growth for 2024 and 2025 and an EBITDA margin of 19.5%, the company would be trading at 6.6EV/EBITDA with 2025 numbers.
We want to remark again the high reliability of the guidance in this type of companies. At the beginning of the year, they already had more than 75% of the guided revenues in their net backlog. And the margins are protected since the sign of the contract due to the high percentage of direct costs, and in the case of SanLorenzo to the clause for which they can increase the price up to a 3% if high inflation persists.
Other announcements
Sanlorenzo has also announced a dividend payment €0.66 (1.57% yield), to be paid on 4th May, with the ex-dividend date on 2nd May. For the following years, a 30-40% dividend pay-out is expected.
As disclosed in our latest update, SanLorenzo acquired Equinox to provide Charter Fleet services. Now, they want to enlarge their refit services capacity as they recognize the bright future due to the aging of the average yacht and the higher number of them. We expected the impact of the services to be bigger in the revenue mix. But for them, their biggest focus with the services is to strength the brand.
SanLorenzo is going to put their commercial efforts in the APAC region, where they plan to start direct distribution before June.
As they had already done enlarging their offering from Yachts to Superyachts and Bluegame. With the strong cash generation, the company wants to use it to enter another segment (no more clues) through M&A. We should see it materialized in around one year.
Our thoughts about SanLorenzo and some comments about The Italian Sea Group
The Italian company has showed again the quality and strength they possess. As advanced in our previous article, SanLorenzo targets a low-single digit growth with increasing margins and a robust cash generation. We do not have many doubts about their capability to achieve it thanks to the current backlog, the solid management and growth opportunities. We think they could be more aggressive in taking a larger share of the growth in the sector.
A point which is quite important from our perspective is the superyachts segment. As noted by the market and reaffirmed by SanLorenzo’s management, a supply shortage in the construction of Superyachts is expected. The problem is that it is difficult to increase the operating capacity and it takes time to do it. Here, we see a huge advantage for TISG.
We feel very confident with this industry and in the capacity of SanLorenzo and TISG for the future. There is a clear sign of mismatch between the demand and the supply of yachts while the number of UHNWI is increasing consistently every year. We also consider the market is more resilient to crisis than what the market thinks.
SanLorenzo is trading at 20 times earnings, which we consider reasonable considering the quality and future growth of the company. However, we continue thinking that The Italian Sea Group is a better investment opportunity due to their higher growth, construction of bigger yachts and a more attractive valuation. We take the opportunity to comment that TISG.MI has sold two mega yachts in the US during the last weeks (73 and 88 meters long).
Having said that, we hold in high regard the quality of SanLorenzo and are confident on the solidness of the business and the management team. We will continue following SanLorenzo and providing updates in Moram.