Sanlorenzo FY22 results

Introduction to Sanlorenzo $SL.MI

Sanlorenzo – $SL.MI presented today its FY22 results. Sanlorenzo 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. The company has been broadening its yacht offerings and has now entered the highly lucrative market for yachts over 40 meters.

Since its initial public offering in 2019, Sanlorenzo has seen impressive growth and improving margins. It has benefited from the overall strength of the yacht industry. Which has thus far remained resilient in the face of potential economic uncertainty. Additionally, the firm has a strong revenue outlook for the coming years, due to its substantial backlog, being fully booked for super-yachts until 2027.

We published an investment thesis about Sanlorenzo 4 weeks ago

Sanlorenzo FY22 results

Today, Sanlorenzo presented its preliminary results for 2022. The results have been great, positioning themselves in the high-end of the guidance.

*We include the acquisition of Polo Nautico Viareggio and Equinoxe.

Revenue has increased a 26.4% to €740.7 million. Especially boosted by the new models in the Yacht (28% growth) and Bluegame (72.2%) divisions. By contrast, the Superyacht division has grown at an 11.9%, which is a bit disappointing compared to TISG´s results. And it is in this division, where we have some worries despite the strong effort that management makes to push it. Even if the management comments that they have sufficient capacity, the fact of having all sold out for Superyachts until 2026 (GT<500) and 2027 (GT<500) and the high demand for this segment makes us think that there is a constraint in the operating capacity as we commented in the investment thesis. Nevertheless, the length of the yachts sold in all the divisions is each time higher.

By region, Europe has continued to be the fastest growing, with an excellent contribution from Italy. They have also informed us about a verbal agreement on an acquisition of the largest retailer in APAC (12 offices and 10 service points). According to the management, there is a 95% chance of completing the acquisition during Q1. With this, they would achieve the goal of establishing direct distribution in the region.

The company has also commented that while they are one of the most expensive brands compared to competitors in the Yachts and Bluegame segments, they have still a gap in the price for Superyachts compared to Dutch and German competitors. During the last two years, the company has increased the price a 3% every six months. Sanlorenzo has announced that they expect a further increase in margin in all the divisions which will be more pronounced in the Superyacht segment.

As above mentioned, the length of the boats sold within divisions is higher, this is shown by the higher visibility of the backlog. In 2020 and 2021, 25.4% and 40.6% of the backlog corresponded to +1-year collections, respectively, while 42.3% of the backlog is for 2024 and beyond.

The order intake was good during the year except for Q4 in which it was quite weak. When asked about it, management answered it was because of crisis rumours. Even if we did not like this response, we think the market remains robust as shown by competitors. And we consider that this won´t affect the long-term performance of the company.

The investments (€59M) have been primarily focused on increasing the operating capacity (€34.3M). With the great cash position they own, they do not expect to execute large acquisitions but to continue to integrate the business. 

For the next three years, they have already advanced that they aim to achieve a low double-digit growth in revenue and the same increase in EBITDA margin as during the last years (around 100 bps per year). The growth of the demand and the sector is anticipated to be higher. 

As we see it, this growth could be higher, but the company says that their business model is based on made-to-measure yachts and want to focus on expanding margins and making sure the suppliers can keep up with the demand. Again, we think that even if all this can be true, we feel they have been a little slow in gaining adequate operating capacity and that the supply chain constraints the matching of the growing demand. 

Our thoughts about Sanlorenzo FY22

Sanlorenzo FY22 results have been fantastic, showing that Sanlorenzo is a high-quality company with great cash generation. We are pretty sure of the capacity of delivering strong results in the following years. However, we think that the share price offers a little margin of safety.

As we already commented in Sanlorenzo’s thesis published on 15^th January, we still think TISG is a better investment opportunity. TISG  is still trading at a lower valuation (despite the strong increase in TISG’s share price since October), and the launching of projects is expected to generate higher revenue growth with a higher opportunity for margin expansion. 

On 15^th March, SanLorenzo will present the business plan for the next three years which we will comment on Moram.