Ferretti – The next luxury yacht builder IPO in Europe

Introduction to Ferretti Group

In the last six months, we have covered the yacht sector because we have seen a macro opportunity due to the growth of UHNWI, the niche nature of the yacht sector within exclusive luxury goods, and that the growth in the number of luxury yachts has been much lower than the number of new ultra-wealthy individuals since the GFC (many shipyards went bankrupt – from 120 in 2008 to 70 in 2022).

Within this sector, we have analyzed companies oriented to wealthy and ultra-wealthy individuals (TISG, Sanlorenzo), and upper-class individuals* (ONEW, HZO,…), although the latter are dealers and not shipbuilders (different dynamics, but as it is a much more penalized industry, we have included it in the analysis).

Today, to complete the trilogy of Italian companies, we focus on a 55-year-old company well-known in the luxury yacht market, Ferretti, as it has recently announced its IPO on the Milan Stock Exchange. According to Bloomberg, in 2Q23 (although last year it went public in Hong Kong).

Ferretti, apart from being a historic company, seems interesting to us for being one of the top constructors of yachts between 20 and 40 meters (although their range goes from 8 to 95 meters across its 7 brands).

On the occasion of its IPO on the Italian stock exchange, the company recently presented very ambitious medium-term objectives: +10% organic revenue growth & EBITDA margin of +18.5%. It is the yacht company with the cheapest valuation at only 4x EV/EBITDA and with more than 40% of the market cap in net cash.

We also take advantage of this article to compare Ferretti with the companies we have presented and that we cover in Moram (The Italian Sea Group and Sanlorenzo), as well as with the three French luxury yacht companies oriented to the VHNWI sector.

*Note: we have also analysed Malibu, Catana Group, Nimbus, Beneteau & Fontaine Pajot but more superficially & there is no analysis published on our website

What is the history of Ferretti and what is differential about it?

Ferretti was founded in 1968 by brothers Alessandro and Norberto Ferretti in Forlì, Italy. They began by building small boats but soon shifted their focus to luxury motor yachts. In 1971, Ferretti launched its first yacht.

Through the last decades of the last century, Ferretti continued to expand their range of yachts. The turn of the millennium brought significant changes for Ferretti. In 2000, the Ferretti Group was formed, bringing together several of Italy’s leading luxury yacht brands.

The great financial crisis had big consequences for Ferretti, and they were forced to look for external financing. In 2012, Ferretti Group was acquired by Weichai Group, a Chinese state-owned company, in a deal valued at €367 million. The new shareholders named the management that still runs the company nowadays. This group of people has achieved a double-digit growth in the top–line since 2014, with an acceleration over the past few years aided by industry tailwinds. 

On 31st March 2022, they went public with ticker HKG: 9638, on the Hong Kong exchange raising €233 million. Only one year later, they have decided to dual list on the Italian stock exchange too. The dual primary listing is still dependent on the approval of the shareholders and the regulatory institutions in Italy and Hong Kong.

Ferretti owns and operates six shipyards and a production plant for interior fittings and customized furnishings, all located in the Italian nautical district. 

As you could previously see in our The Italian Sea Group and SanLorenzo thesis, in this industry, all the production in the industry is backed by orders, with non-refundable payments credited as milestones are reached. Following the similarities, Ferretti also has luxury partnerships and has recently extended the agreement with Rolls Royce for using its marine diesel engines (mtu) yacht propulsion system until the end of 2027.

They recently announced their strategy for the next years at the Market Capital Day held in March, we highlight the following points:

• Continue with the product portfolio expansion. On the one hand, we value the exclusivity it offers, but we also think that the design and R&D capacity could suppose some constraint
• Bring the made-to-measure yacht segment, which is the most customizable and thus with the highest margin, to the most premium segment.
• Continue with vertical integration. As TISG and SL are doing, Ferretti is vertically integrating the business. It has recently acquired a majority stake in two companies that are part of its supply chain. 
• Ramp up ancillary services. Right now 9% of the revenues come from ancillary services, most of them from the trading of pre-owned yachts.

All these points they plan to achieve with a combination of organic and acquisitions.

Like the rest of the industry, Ferretti continues expanding its operating capacity to be able to match demand. With part of the proceeds from the IPO in 2022, the company bought the Cantiere (Shipyard) San Vitale, in Ravenna, next to the Adriatic Sea for €40 million. They will make another €40 million investment dedicated to new spaces and R&D during the next three years. At full operating status, this shipyard will add 20% to the current operating capacity.

What yacht brands own Ferretti Group?

In the next image, you have an image of the different brands of Ferretti and their characteristics. Their main market is 20-40 meters, that is the same segment in which SanLorenzo competes. This is why from now on we will center our comparison with SanLorenzo, and not with TISG.