The Italian Sea Group investment thesis
Results of companies

The Italian Sea Group – FY22 results and 2023 Guidance

Introduction to The Italian Sea Group

The Italian Sea Group is a leading shipbuilding and yachting company with headquarters in Marina di Carrara, Italy. Founded in 2003, the company has established itself as one of the largest shipbuilding companies in the world and is renowned for producing high-quality, innovative luxury yachts. In the summer of 2021, the company went public with an initial public offering (IPO) and in 2022, it acquired Perini Navi, further solidifying its position as a leader in the yachting industry. The company is now experiencing significant growth and is well-positioned for continued success in the future.

Italian Sea Group FY22 results

The Italian Sea Group (TISG) presented today their preliminary results for the full year 2022. Revenues have increased by 59% up to 295 million euros, with the EBITDA margin increasing to 15.9% (from 15% in 2021).

The acquisition of Perini Navi has shown to be key to the company’s strategy and development. With it, TISG has increased their operating capacity considerably and incorporated a powerful brand (Perini) that has already contributed 52 million euros in revenue in 2022. It currently represents around 14% of the order book and is expected to continue growing.

The net order book has grown to 620M (+16.6% from 2021), this represents more than two times 2022’s sales. Larger boats continue to be their core business with 85% of the backlog from yachts over 50 meters.

By geography, the increase in the order book in the United States has been notable, representing the 30% of the order book compared to a 1% in 2020, mainly driven by the signing of 5 yachts between 65 and 88 meters. Presumably, the Americas will continue to be one of the main drivers of growth.

We want to highlight the company’s cash generation thanks to its business model and the positive impact it will have in the next years due to the end of the CAPEX cycle. A data worth mentioning is that they have the capacity to produce 500M in revenue. We expect a CAPEX of around 4-5 million euros.

The Italian Sea Group has set an ambitious growth strategy for the next two years, 2023-2024. The strategy focuses on organic growth and takes into account the company’s current structure, partnerships, and commercial reach. The company aims to achieve revenues of EUR 350-365 million in 2023 with an EBITDA margin of 16-16.5%. The revenue target for 2024 is set at EUR 400-420 million with an EBITDA margin of 17-17.5%. The company aims to maintain a neutral financial position with maximum leverage of 1.5x EBITDA and to distribute a yearly dividend. These goals are subject to temporary impacts related to the company’s capital expenditures and M&A strategy.

The shareholders will receive a dividend payment of 40-60% of net income, according to our calculation this will be around 0.23-0.26€ per share (3.8% yield) for 2023.

Revenue (€M)350-365400-420
EBITDA margin (%)16-16.517-17.5

For 2023, they have already 85% of the revenues ensured thanks to the signed contracts. And the management has already mentioned that they see themselves at the high end of the guidance.

Our thoughts about The Italian Sea Group $TISG.MI

With all we have mentioned, we feel comfortable with TISG in our portfolio. The results and strategy update goes on track with what we expect from the company. Their revenue and profitability visibility, the strength of the sector, and the strategy planned make us think that the revenue growth can be maintained while starting to remunerate its shareholders. Moreover, we specially like the operating leverage of the company as the facilities are already built and they have capacity for €500MM revenue / year.

We recently conducted a deep investment thesis of San Lorenzo, the only comparable player in the Italian yacht building industry which is publicly listed (focused on smaller yacht 20-40m). This analysis has reinforced our views that The Italian Sea Group is the company with the most potential in an industry that has strong tailwinds. And we feel very comfortable having it in our portfolio.

We will update our thesis on TISG to incorporate all the strategy changes into the thesis and our valuation model.

Author: Alexandre Oliver