Delignit — Ecological hardwood-based products

Last close As at 24/06/2024

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Market capitalisation

Research: Industrials

Delignit — Ecological hardwood-based products

Delignit manufactures ecological materials, mostly based on European hardwood, which makes them CO2 neutral in their lifecycle. Within the automotive division (85% of revenues), the company focuses on light commercial vehicles (cargo bay protection and cargo securing systems), motor caravans (interior furnishings such as cabinet systems) and passenger cars (trunk covers). FY20 results so far have been affected by the impact of COVID-19 on the automotive sector. Longer term, Delignit will benefit from expected growth in light commercial vehicles, geographical expansion and broadening its product offering.

Johan van den Hooven

Written by

Johan van den Hooven

Analyst

Industrials

Delignit

Ecological hardwood-based products

Industrials

Deutsches Eigenkapitalforum 2020

30 October 2020

Price

€4.34

Market cap

€36m

Share price graph

Share details

Code

DLX

Shares in issue

8.2m

Net debt at 30 June 2020

€12m

Business description

Delignit manufactures ecological products and system solutions based on sustainable raw materials for technology sectors such as the automotive and railway industry. Delignit’s material is predominantly based on European hardwood and is CO2 neutral in its lifecycle. Exports account for >50% of sales. MBB is the majority shareholder with 76%.

Bull

New serial supply contracts in LCV segment.

Increased and enhanced applications for existing products.

Expanding in adjacent markets.

Bear

High dependence on large OEM contracts.

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

Valuation already factors in growth prospects.

Analyst

Johan van den Hooven

+44 (0)20 3077 5700

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

Delignit manufactures ecological materials, mostly based on European hardwood, which makes them CO2 neutral in their lifecycle. Within the automotive division (85% of revenues), the company focuses on light commercial vehicles (cargo bay protection and cargo securing systems), motor caravans (interior furnishings such as cabinet systems) and passenger cars (trunk covers). FY20 results so far have been affected by the impact of COVID-19 on the automotive sector. Longer term, Delignit will benefit from expected growth in light commercial vehicles, geographical expansion and broadening its product offering.

Recovery expected from H220

After a good start to 2020, Delignit’s performance was hit by the impact of COVID-19 as many customers temporarily closed their plants. This resulted in a 20.6% decline in H120 revenues to €25.6m and 35% lower EBITDA at €1.6m. Delignit’s guidance for FY20 is revenues in the range of €51–56m, which implies at least flat revenue in H2 vs H1.

Expected growth in eLCV and motor caravans

Delignit continues to expand in the light commercial vehicle (LCV) segment, with its first 10-year order for a system floor solution for a new electric LCV (eLCV) due to start in 2022 (total contract value more than €15m). According to IDTechEx, the eLCV segment represents 3% of the total LCV segment and is expected to increase to 23% by 2030, offering strong growth opportunities for Delignit over the next few years. A relatively new market segment for Delignit is the motor caravan market, which currently benefits from the COVID-19 pandemic as it is one of the safest ways to take a holiday. According to the Caravaning Industry Association, CIVD, motor caravan sales showed growth in Germany of 34% y-o-y year to date. Delignit’s long-term ambition of generating revenues in excess of €100m and an EBITDA margin of at least 10% still stands, although COVID-19 could result in a delay in achieving these targets to beyond 2023.

Valuation: Assuming strong recovery

Consensus assumes that in FY21 Delignit will have fully recovered from the temporary dip in EBITDA in FY20. It is valued at a premium to its peers, which suggests that investors are confident in management’s ability to deliver growth over the next few years on the back of the post COVID-19 economic recovery.

Consensus estimates

Year
end

Revenue
(€m)

EBITDA
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

EV/EBITDA
(x)

12/18

60.3

5.6

0.31

0.05

14.3

7.0

12/19

64.4

4.8

0.17

0.00

26.0

8.1

12/20e

54.5

3.7

0.05

0.01

86.2

11.9

12/21e

60.7

5.1

0.18

0.05

24.1

9.3

Source: Delignit, Refinitiv

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United Kingdom

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This report has been prepared and issued by Edison as part of a roadshow package for companies attending the Deutsches Eigenkapitalforum. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

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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. 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 (i.e. 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.

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This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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