The European Yacht Industry
As we do every quarter, once Italian companies report their results, we review all the companies in the industry and the current state of the sector. We started analyzing this industry more than three years ago, looking for attractive opportunities that could benefit from the secondary effects of COVID, and in which we have specialized (you have the full guide to the Superyacht industry here) not only to be present when a sector revaluation is expected but also to detect — as we did this February — when we believed that stock prices and the sector’s reality have reached their limits, and it was better to wait for better times.
We are currently in a very interesting situation, with companies trading at a significant discount compared to their situation six months ago, and with quite different expectations. In the case of Italian companies (more oriented towards UHNWI), it is evident that the net backlog is decreasing, while French companies are clearly paying the price for the cyclical nature of their business, as reflected in their stock prices.
However, after analysing them all, and based on the fact that they are theoretically trading at attractive metrics, we see significant differences between them (not all of them should be evaluated with the same multiple due to the nature of their business).
Today’s objective is to review the situation of the six companies and share our assessments, target prices, Spreadsheets with all detail and answering the big question in detail, & objectivity, which ones of them are more attractive from our point of view
Introduction to the Yacht Industry
For those not so familiar with the luxury yacht industry, we provide a brief description of the companies that make up the industry (not all are in the same segment) to facilitate understanding of the analysis and the different comparisons/reference metrics used with them throughout the analysis.
Similarly, you have the industry guide below, where we explain from scratch each of the players involved, as well as previous updates we have made on the industry.
Educational, how to perform a DCF? (TISG & Sanlorenzo models as example)
Time to jump the ship? (Feb-24, historical highs of the industry)
Also, you have available all the investment thesis /Analyses of the companies mentioned in this analysis on our Substack +. continuous comments about its situation through the last 3 years
The Italian Sea Group: A company specialized in megayachts (over 50m in length), which account for more than 80% of their revenues. Their main brands are Admiral and Perini Navi. They also have agreements with Giorgio Armani and Lamborghini for smaller models. In 2021, they took advantage of Perini Navi’s bankruptcy to acquire its brand and that of Picchiotti. We are shareholders (with entries and exits since their IPO in the summer of 2021) and possibly the first to analyze them publicly (June 2021), making this our most well-known thesis in this industry.
Sanlorenzo: Company historically specialized in superyachts of 30-40m in length, but which also has a growing segment of megayachts that now represents 30% of its revenues. The average price of their sold boats is approximately half of TISG (strictly counting all units sold by both), but their EBITDA margins are currently higher. The management is making a significant effort to expand its presence in APAC.
Ferretti: An Italian company based in Hong Kong that completed its dual listing last year to also trade in Milan. It sells large motor yachts through its seven brands. They have a superyacht division that accounts for approximately 15% of their revenues; the average size of their boats is considerably smaller than that of their Italian peers and, consequently, their backlog. Their EBITDA margin is 3 points lower than their competitors’. The market values it as a hybrid halfway between the two Italian companies and the French ones (more cyclical), although it is still distant, it is closest in terms of the average price of its boats.
Catana Group: French company specialized in sailing catamarans that announced in 2023 the launch of its new brand of motor catamarans, with its production plant set to start operations at the end of this year. It is likely better known for its Bali brand, which, since its launch in 2014, has positively transformed the company’s trajectory. (Thesis updated this week)
Fountaine Pajot: French company specialized in catamarans with a long history and growth. Since 2018, it also has a line of monohull sailboats thanks to the acquisition of a specialized company. It may be the least known of all since it only reports in French, but it has built more than 4,000 catamarans and is one of the most famous brands in the world. Its situation and stock price are quite curious.
Bénéteau: A French company that sells monohull sailboats and motorboats. It is the company that offers the lowest-priced vessels (€100k-400k for sailboats and from €25k for motorboats) and is performing the worst in 2024. Additionally, it is the only non-pure player, as it also has an outdoor accommodation division that accounts for approximately 20% of its revenues.
To provide a bit more context
That is to say, as we can see, we can divide this industry into several segments:
Pure player Megayachts: The Italian Sea Group
Mix Megayachts / Superyachts: Sanlorenzo, Ferretti*
Pure players Catamarans (Yachts): Catana Group, Fountaine Pajot
Monohulls (Mix Yachts & Boats): Beneteau
Note: Megayachts (>50m), Superyachts (20-50m), Yachts (10-20m)
This does not mean that some are better than others simply because they are in a segment of larger or smaller boats, since, as we will see later, there are players in smaller boats that achieve higher EBITDA margins than, for example, TISG, which is the player in megayachts. However, this distinction is important because the relevant variables to evaluate one or the other are different.
Similarly, for instance, outsourcing vs. in-house work is also relevant, as it allows them to adapt quickly (or not) to changes in demand, which is especially important for smaller boats (shorter construction time).
Industry’ situation & detailed for each company
After several years of a boom in the industry, we are beginning to see some slowdown in demand in 2024, which has caused a shift in market perception towards the industry. However, let’s take a closer look, as there are clear differences between companies.
