Main menu
Edison Group
  • Home
  • Sparks
  • Equities

    Equities

    View All Equities

    Equities by Sector

    YXT.com

    MCap

    USD127m

    Last close

    USD23.43

    ▲ 20.23 (632.19%)

    Northern Data Group

    MCap

    EUR486m

    Last close

    EUR7.56

    ▲ 2.33 (44.59%)

    Bodycote

    MCap

    GBP1,572m

    Last close

    GBP9.23

    ▲ 173.00 (23.07%)

  • Sectors

    Sectors

  • Megatrends

    Megatrends

  • Thematics

    Thematics

    View All Thematics

    Latest

  • Audiovisual

    Audiovisual

    View All Audiovisual

    Latest

Delignit — Delignit delivers

Last close As at 05/08/2026

—

— 0.00 (0.00%)

Market capitalisation

—

Research: Industrials

Delignit — Delignit delivers

Delignit has combined another strong trading performance (H118 EBITDA up 16%) with further signs of a potentially lucrative return on its strategic goal of business model transition. While early days, the award of a high-profile OEM contract for motor caravans brings not only the promise of double-digit million annual sales but, yet more importantly, encouraging evidence of Delignit’s ability to transfer its model to new markets. Meanwhile, H1’s clear EBITDA margin beat (by 10%) suggests that, as for 2017, this full-year management guidance may well prove cautious. Finances remain sound (net debt/EBITDA of only 0.8x for the last 12 months).

Richard Finch

Written by

Richard Finch

Analyst, Consumer

Industrials

Delignit

Delignit delivers

Materials

Scale research report - Update

28 August 2018

Price

€8.25

Market cap

€68m

Share price graph

Share details

Code

DLX

Listing

Deutsche Börse Scale

Shares in issue

8.2m

Last reported net debt at June 2018

€4.4m

Business description

Delignit is a German manufacturer of ecological products and system solutions based on hardwood for the automotive, rail and safety equipment industries. It was acquired by Germany-based industrial holding company MBB (Messerschmitt-Bölkow-Blohm) in 2003 and was listed in 2007. Exports account for almost 50% of sales.

Bull

■

Solid order intake in the LCV and rail transport segments.

■

Increased and enhanced applications for existing products.

■

Rapid take-up of the products in global markets.

Bear

■

High dependence on large OEM contracts.

■

An increase in oil prices could reduce the company’s profitability.

■

Valuations already factor in growth prospects, creating downside risk.

Analyst

Richard Finch

+44 (0)20 3077 5700

Delignit has combined another strong trading performance (H118 EBITDA up 16%) with further signs of a potentially lucrative return on its strategic goal of business model transition. While early days, the award of a high-profile OEM contract for motor caravans brings not only the promise of double-digit million annual sales but, yet more importantly, encouraging evidence of Delignit’s ability to transfer its model to new markets. Meanwhile, H1’s clear EBITDA margin beat (by 10%) suggests that, as for 2017, this full-year management guidance may well prove cautious. Finances remain sound (net debt/EBITDA of only 0.8x for the last 12 months).

Continued impressive profit conversion in H1

The six months to June maintained the pattern of recent halves with meaningful profit conversion of 8% y-o-y revenue growth. Gains of 16% and 30% respectively in EBITDA and net profit were driven again by investment-led economies of scale, notably a reduction in material costs. Automotive, Delignit’s principal sector, was to the fore (revenue up 15%) thanks, as in the last two years, to strong OEM business and increasingly to targeted maximisation of revenue per vehicle. By contrast, Technological Applications saw a 10% top-line decline from a demanding comparative. Exports continued to be the driver (up 22%) in line with strategic expansion. Net debt at June 2018 was €4.4m (€4.0m at end 2017).

More of the same in H2

Favourable macro factors aside, Automotive should benefit from OEM follow-up work as well as new orders, while Technological Applications is set to stabilise. Confirmed 2018 guidance is for sales growth of more than 8% and EBITDA margin at least at the level of 2017 (9.2%). Clear EBITDA margin outperformance (9.9% against 9.0% y-o-y) in H1 on such volume enhancement makes this full-year management guidance appear cautious. Further out, there should be an increasing contribution from the 9-year motor caravans contract (likely fully effective by 2021).

Valuation: Long-term appeal

Given maintained good prospects, the current weakness of the share price appears to be a correction after its spectacular response (up c 50%) to the 2017 earnings surprise. Also, the FY17 P/E ratio of c 34x is at a marked premium to both Delignit’s wood processing and automotive supplier peer groups. Management guidance for 2018 gives EV/EBITDA of c 13x (peer average c 6x).

Historical financials

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/14

42.7

1.7

0.13

0.03

63.5

0.4

12/15

44.4

1.7

0.14

0.03

58.9

0.4

12/16

48.6

2.1

0.18

0.03

45.8

0.4

12/17

52.7

2.9

0.24

0.05

34.4

0.6

Source: Delignit accounts

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

Review of H118 results

Exhibit 1: Analysis of half-yearly revenue and profit

€m

H117

H217

FY17

H118

FY18 guidance

Revenue

27.1

25.6

52.7

29.4

Change (%)

+11%

+6%

+9%

+8%

Up 8%+

Automotive

37.7

Change

+12%

+2%

+7%

+15%

Technological applications

15.0

Change

+8%

+16%

+12%

-10%

Germany

16.6

16.7

33.3

16.6

Change

-5%

+1%

-2%

Flat

Exports

10.5

8.9

19.4

12.8

Change

+50%

+17%

+33%

+22%

Other income

0.3

(0.3)

Neg.

(0.3)

Total income

27.4

25.3

52.7

29.1

Material costs

(15.5)

(13.8)

(29.3)

(15.2)

Labour costs

(7.6)

(7.0)

(14.6)

(8.6)

Other operating costs

(1.8)

(2.2)

(4.0)

(2.4)

EBITDA

2.5

2.4

4.9

2.9

Margin

9.0%

9.4%

9.2%

9.9%

At least flat

Depreciation

(0.7)

(1.0)

(1.8)

(0.8)

EBIT

1.7

1.4

3.1

2.1

Net interest

(0.1)

(0.1)

(0.2)

(0.1)

Pre-Tax Profit

1.6

1.3

2.9

2.0

Taxation

(0.5)

(0.5)

(1.0)

(0.6)

Net income

1.1

0.8

1.9

1.4

Source: Delignit accounts

The first half of 2018 saw Delignit maintain its recent impressive progress. Strong top-line growth at much higher margin was accompanied by a further surge in export business (44% of group sales against 39% y-o-y) and successful diversification. The main activity, Automotive, saw double-digit gain thanks to continued OEM demand and additional orders from car makers. Aside from favourable conditions, this buoyancy is credited by management to its record investment (€6m) over the previous two years paying off in terms of both customised system solutions and expanded product applications.

Good control of material costs (see Exhibit 1), which were reduced despite higher sales volumes, drove significant margin gain, eg EBITDA margin of 9.9% against 9.0% in H117. With depreciation and finance costs largely unchanged, the revenue boost was yet more pronounced further down the line (pre-tax profit up 22%).

Resilient outlook

Economic forecasts remain generally positive both domestically and for exports, now such an important contributor to Delignit. Its key market of lightweight automotive continued to grow by over 4% in the first half of the year and is expected by the European Automobile Manufacturers’ Association (ACEA) broadly to maintain that pace until at least 2021. The ecological properties of its products and its technical know-how are allowing the company to capitalise on this demand, as also in other markets, by developing partnerships with significant industry players.

Maintained trading momentum and H1 EBITDA margin (9.9%) well ahead of full-year guidance (at least 9.2%) give confidence that management expectations for 2018 should be met, if not exceeded. Its worst-case EBITDA outturn in H2 (€2.3m) would imply c 8.6% margin, which the company has comfortably achieved over the past 18 months, as shown above.

Balance sheet and cash flow

While cash flow was slightly negative in H118, period-end net debt of €4.4m ensures that Delignit remains lightly borrowed with ample room for investment and dividend growth. The equity ratio improved y-o-y from 46% to 51%.

Valuation

As there are no companies that match Delignit’s profile closely, we have identified for peer comparison four wood processing companies, even if with lower exposure to the automotive sector (Westag & Getalit, Pfleiderer, Surteco and Ober), as well as four automotive suppliers (Grammer, Progress Werk, SHW and Delfingen) offering products such as seat covers, insulation, components and systems for car interiors.

As consensus forecasts for Delignit are not available, we have conducted a comparative analysis based on the last reported year, as well as management’s EBITDA margin guidance for 2018. Despite current weakness after the post-2017 results share price rally, Delignit still trades at a considerable premium to the blended peer group on trailing P/E (67%) and trailing EV/EBITDA (87%). Management’s newly confirmed guidance for 2018 implies EV/EBITDA of c 12.6x, admittedly on most cautious assumptions but well ahead of the 5.8x peer average. While this suggests that the company’s strong growth outlook is priced in, it also reflects confidence that company earnings may again surprise and that investors should look at the long term, ie management’s “vision” of more than €100m revenue in 2022 at double-digit margin owing to scale benefits. For indicative purposes, this may imply EBITDA of c €11m (say, 11% margin on €100m revenue) compared with formal guidance for the current year of at least €5.3m.

Exhibit 2: Peer group comparison

Market cap

P/E (x)

EV/EBITDA (x)

(€m)

2017

2018e

2017

2018e

Wood processing companies

Westag & Getalit

182

26.0

N/A

10.0

N/A

Pfleiderer

527

30.1

14.0

6.5

5.9

Surteco

347

13.2

13.1

6.5

6.3

Ober

16

17.3

12.7

9.3

N/A

Automotive suppliers

Grammer

752

22.4

13.3

7.3

6.0

Progress Werk

120

12.0

8.8

5.5

4.8

SHW

200

19.6

19.6

5.3

5.3

Delfingen

76

8.0

8.8

6.0

6.7

Peer group average

18.6

11.3

7.1

5.8

Delignit

61

31.0

N/A

13.3

c 12.6*

Premium to peer group

67%

N/A

87%

117%

Source: Company accounts, Bloomberg, company guidance. Note: *Based on management guidance. Prices as at 20 August 2018.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors.

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on

View All

Industrials

Delignit — Automotive drives strong recovery in H121

Industrials

Delignit — Further recovery anticipated in FY21

Industrials

Delignit — Ecological hardwood-based products

Industrials

Delignit — Gradual recovery ahead

Latest from the Industrials sector

View All Industrials content

Industrials

Mersen — Electrical Power drives guidance upgrade

Industrials

Braemar — Meeting the new CFO

Industrials

International Airlines Group — Resilience through a more challenging quarter

Industrials

Hargreaves Services — Repositioned for the infrastructure decade

Research: TMT

Thin Film Electronics — NFC ramp-up slower than expected

Revenues from sales of NFC tags more than doubled during H118 as the number of clients and size of campaigns increased. However, Thinfilm’s management notes that the rate of increase in demand for NFC solutions during Q218 was more modest than previously anticipated and has delayed break-even to 2020. We revise our estimates and reduce our indicative valuation from NOK3.01/share to NOK1.92/share.

Continue Reading
Cookie Policy Overview
Edison Group

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping us understand which section of the website you find more interesting and useful. See our Cookie Policy for more information.

Strictly necessary and functional

These cookies are used to deliver our website and content. Strictly necessary cookies relate to our hosting environment, and functional cookies are used to facilitate social logins, social sharing and rich-media content embeds.

Advertising

Advertising Cookies collect information about your browsing habits such as the pages you visit and links you follow. These audience insights are used to make our website more relevant.

Performance

Performance Cookies collect anonymous information designed to help us improve the site and respond to the needs of our audiences. We use this information to make our site faster, more relevant and improve the navigation for all users.