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Last close As at 08/06/2023
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Research: Industrials
Accsys showed stronger than expected volume growth of 6% in FY23, beating our 1% estimate. Reactors 1–3 in Arnhem are in full production and the fourth is ramping up faster than we expected. There was no news on the Tricoya project in Hull, but construction of the Accoya plant in the US is delayed by four to five months and faces cost inflation. The company’s EBITDA guidance is now ‘moderately ahead’ of doubling to €20.8m previously. Our DCF value still points at €1.15 per share, including >€0.20 as option value for Hull, which we have taken out of our FY25 estimates.
Accsys Technologies |
Stronger than expected volume growth in Q4 |
FY23 guidance update |
General industries |
10 May 2023 |
Share price performance
Business description
Next events
Analyst
Accsys Technologies is a research client of Edison Investment Research Limited |
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Accsys showed stronger than expected volume growth of 6% in FY23, beating our 1% estimate. Reactors 1–3 in Arnhem are in full production and the fourth is ramping up faster than we expected. There was no news on the Tricoya project in Hull, but construction of the Accoya plant in the US is delayed by four to five months and faces cost inflation. The company’s EBITDA guidance is now ‘moderately ahead’ of doubling to €20.8m previously. Our DCF value still points at €1.15 per share, including >€0.20 as option value for Hull, which we have taken out of our FY25 estimates.
Year |
Revenue |
EBITDA* |
Net profit* |
EPS* |
EV/sales |
EV/EBITDA |
03/21 |
99.8 |
10.1 |
1.3 |
0.01 |
3.7 |
36.8 |
03/22 |
120.9 |
10.4 |
2.1 |
0.01 |
3.3 |
38.2 |
03/23e |
159.8 |
21.7 |
10.2 |
0.05 |
1.3 |
9.8 |
03/24e |
184.4 |
26.7 |
12.4 |
0.06 |
1.1 |
7.9 |
Note: *EBITDA, net profit and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Fourth reactor shows faster than expected ramp up
In its trading update, management provided an FY23 guidance update, with the full set of results due on 27 June. Accoya sales volumes in FY23 were up 6% to 63,344m³ (vs our estimate of 60,000m³). This reflects 64% growth in H2 to 39,387m³, clearly better than company guidance of +50%. In H1, volumes were affected by plant shutdowns related to delays in the construction of the fourth reactor (volumes down 19% y-o-y). Since the start of production at the fourth reactor in September 2022, the first three reactors returned to full production (capacity of up to 60,000m³) and the fourth has been ramping up (capacity of up to 20,000m³). Some unwinding of higher inventory (work in progress) levels also contributed to volumes in H2. Accsys now expects FY23 EBITDA to be ‘moderately ahead’ of its previous guidance of a doubling of last year’s underlying EBITDA of €10.4m (vs our prior estimate of €19.2m). Net debt was €44m (below our estimated €52m), €8m lower than at end December 2022, mainly due to lower inventories and higher EBITDA.
Update on strategic projects
Construction of the Accoya plant in the US is making good progress but mechanical completion has faced some delays and cost inflation and, as a result, commercial operations are now expected to start mid-2024, a delay of four to five months (we already anticipated mid-2024). There is no update on the Tricoya project in Hull, which is still on hold. Accsys is considering all commercial factors to decide whether to proceed with the project. We have taken our Hull estimates out of our FY25 estimates, but still assume that the Hull project will be continued sometime in FY24.
Unchanged valuation, including option value for Hull
We have raised our FY23 estimates due to the faster ramp up in Arnhem but have left FY24 broadly unchanged as Arnhem will near full capacity. Accsys is trading on EV/sales of 1.3x and EV/EBITDA of 9.8x in FY23e. Our DCF model is now based on estimates for Arnhem only and we add a separate value for the Accoya US joint venture, pointing at a value per share of around €0.95. The option value for Hull adds >€0.20 per share, bringing the group value per share to €1.15 (unchanged).
FY23 estimates raised
We have raised our FY23 estimates after the better-than-expected Q4 volumes and the increased EBITDA guidance (see Exhibit 1). We have increased our FY23 revenue forecast by 4% to incorporate the faster than expected ramp up of the fourth reactor in Arnhem and have left our price level assumptions unchanged. We have increased our EBITDA forecast by 13% from €19.2m to €21.7m, to bring it in line with the updated company guidance. We have left our FY24 revenue and EBITDA estimates broadly unchanged as the fourth reactor in Arnhem will near its full capacity. As the Hull project is still on hold, we have taken our estimates for Hull out of our model from FY25 for the time being, awaiting further announcements. That is the reason for the downward adjustments for FY25 shown in Exhibit 1.
Our new estimates reflect revenue growth of 32% in FY23, 15% in FY24 and 5% in FY25, fuelled by underlying strong market demand, additional capacity and pricing. Scale benefits and pricing will drive the underlying EBITDA margin towards 17% in FY25.
Exhibit 1: Change in P&L estimates
€m |
FY23e |
FY24e |
FY25e |
||||||
Old |
New |
Change |
Old |
New |
Change |
Old |
New |
Change |
|
Sales |
153.3 |
159.8 |
4.2% |
185.7 |
184.4 |
-0.7% |
228.6 |
192.6 |
-15.8% |
Gross margin |
31.1% |
31.2% |
31.2% |
31.6% |
31.3% |
31.6% |
|||
EBITDA normalised |
19.2 |
21.7 |
13.3% |
27.7 |
26.7 |
-3.7% |
36.6 |
32.8 |
-10.3% |
EBITDA margin |
12.5% |
13.6% |
14.9% |
14.5% |
16.0% |
17.0% |
|||
Net profit (reported) |
-18.7 |
-16.1 |
-13.7% |
13.3 |
12.4 |
-6.9% |
20.5 |
18.3 |
-10.8% |
Net profit (normalised) |
7.6 |
10.2 |
33.3% |
13.3 |
12.4 |
-6.9% |
20.5 |
18.3 |
-10.8% |
Source: Edison Investment Research
Following recent appointments, Accsys’s management board is back at full strength: CEO Dr Jelena Arsic van Os will start on 1 July 2023 at the latest and CFO Steven Salo started on 1 April.
According to Accsys, demand for Accoya and Tricoya is still strong and the company’s focus remains on expanding capacity. The fourth reactor in Arnhem will increase local production capacity to up to 80,000m³, with estimated potential revenues of €195m by CY24. The Accoya plant in the US is now expected to be operational by mid-2024 (July/August) and can produce up to 43,000m³, with potential estimated revenues of €105m by CY27 (this 60%/40% joint venture is equity accounted). We assume the Tricoya project will be continued, although it is unlikely to be operational before mid-2024 (production capacity will be up to 40,000m³).
Higher valuation on increased estimates
For the valuation of Accsys, we use a discounted cash flow (DCF) model as there are no other listed companies with a similar business profile. The company is trading at 1.3x EV/sales and 9.8x EV/EBITDA in FY23e.
Our model now only includes the estimates for the four reactors in Arnhem as we have taken our Hull estimates out for the timing being, awaiting further announcements. We add a separate value for the Accoya plant in the US, which we still expect to be operational in mid-2024 following the start of construction in April 2022. We had already anticipated some delays thus we make no changes to our assumptions for the Accoya plant in the US, as we also assume that the joint venture partners have built in some room for higher costs (such as the announced cost inflation).
Our DCF for the four reactors in Arnhem and the Accoya US JV indicates a value per share of around €0.95 (with an unchanged WACC of 10%). The option value for the Hull project adds >€0.20, totalling an (unchanged) group value of €1.15.
Exhibit 2: Financial summary
€m |
FY21 |
FY22 |
FY23e |
FY24e |
FY25e |
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
INCOME STATEMENT |
|||||
Revenue (reported) |
99.8 |
120.9 |
159.8 |
184.4 |
192.6 |
Gross Profit |
33.1 |
36.0 |
49.9 |
58.3 |
60.9 |
EBITDA normalised |
10.1 |
10.4 |
21.7 |
26.7 |
32.8 |
EBITDA reported |
10.2 |
10.3 |
21.7 |
26.7 |
32.8 |
Depreciation & Amortisation |
(5.7) |
(6.2) |
(7.8) |
(8.6) |
(7.6) |
EBIT normalised |
4.4 |
4.2 |
13.9 |
18.1 |
25.2 |
Exceptionals (Edison definition) |
0.1 |
(0.1) |
(58.5) |
0.0 |
0.0 |
EBIT reported |
4.5 |
4.1 |
(-44.5) |
18.1 |
25.2 |
Net Interest |
(4.1) |
(2.3) |
(0.3) |
(3.5) |
(4.0) |
Results of associates |
(0.1) |
0.0 |
(0.8) |
(0.8) |
(0.8) |
Profit Before Tax |
0.3 |
1.8 |
(44.8) |
14.6 |
21.2 |
Reported tax |
(1.3) |
(1.0) |
(0.6) |
(1.5) |
(2.1) |
Profit After Tax |
(0.9) |
0.7 |
(45.5) |
13.2 |
19.1 |
Minority interests |
1.4 |
1.6 |
30.2 |
0.0 |
0.0 |
Net profit (normalised) |
1.3 |
2.1 |
10.2 |
12.4 |
18.3 |
Net profit (reported) |
0.3 |
2.4 |
(16.1) |
12.4 |
18.3 |
Average number of shares (m) |
164.9 |
178.9 |
211.9 |
219.4 |
219.4 |
Average number of shares, diluted (m) |
173.3 |
185.9 |
218.9 |
226.4 |
226.4 |
EPS normalised (€) |
0.01 |
0.01 |
0.05 |
0.06 |
0.08 |
EPS normalised diluted (€) |
0.00 |
0.01 |
0.05 |
0.05 |
0.08 |
EPS reported (€) |
0.00 |
0.01 |
(0.08) |
0.06 |
0.08 |
DPS (€) |
0.00 |
0.00 |
0.00 |
0.00 |
0.02 |
Revenue growth |
9.8% |
21.1% |
32.2% |
15.4% |
4.5% |
Gross Margin |
33.2% |
29.8% |
31.2% |
31.6% |
31.6% |
Normalised EBITDA margin |
10.1% |
8.6% |
13.6% |
14.5% |
17.0% |
Normalised operating margin |
4.4% |
3.5% |
8.7% |
9.8% |
13.1% |
Reported EBIT margin |
4.5% |
3.4% |
-27.9% |
9.8% |
13.1% |
BALANCE SHEET |
|||||
Fixed Assets |
155.6 |
195.3 |
189.4 |
222.4 |
219.9 |
Intangible Assets |
10.9 |
10.8 |
6.8 |
6.6 |
6.4 |
Tangible Assets |
144.4 |
181.3 |
151.4 |
184.6 |
182.4 |
Investments & other |
0.3 |
3.2 |
31.2 |
31.2 |
31.2 |
Current Assets |
72.5 |
79.8 |
78.7 |
92.4 |
119.3 |
Stocks |
12.3 |
20.4 |
25.8 |
29.8 |
31.1 |
Debtors |
9.8 |
13.2 |
13.1 |
13.6 |
14.2 |
Other current assets |
2.8 |
4.2 |
4.2 |
4.7 |
4.8 |
Cash & cash equivalents |
47.6 |
42.1 |
35.6 |
44.3 |
69.3 |
Current Liabilities |
42.3 |
45.7 |
52.7 |
57.2 |
58.2 |
Creditors |
9.5 |
16.7 |
17.6 |
19.9 |
20.4 |
Other current liabilities |
22.2 |
16.4 |
17.4 |
19.6 |
20.1 |
Short term borrowings |
10.6 |
12.7 |
17.7 |
17.7 |
17.7 |
Long Term Liabilities |
49.2 |
56.5 |
61.5 |
66.5 |
66.5 |
Long term borrowings |
49.2 |
56.5 |
61.5 |
66.5 |
66.5 |
Other long-term liabilities |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Shareholders' equity |
136.6 |
172.9 |
153.9 |
191.1 |
214.6 |
Minority interests |
37.2 |
35.5 |
5.5 |
5.5 |
5.5 |
Balance sheet total |
228.1 |
275.1 |
268.1 |
314.8 |
339.3 |
CASH FLOW |
|||||
Op Cash Flow before WC and tax |
10.2 |
10.3 |
18.2 |
26.7 |
32.8 |
Working capital |
8.3 |
(9.2) |
(3.4) |
(0.4) |
(1.1) |
Exceptional & other |
(1.9) |
(1.5) |
3.5 |
4.0 |
4.5 |
Tax |
0.1 |
0.1 |
(0.6) |
(1.5) |
(2.1) |
Net interest |
3.4 |
2.9 |
(3.0) |
(3.5) |
(4.0) |
Net operating cash flow |
20.1 |
2.6 |
14.7 |
25.3 |
30.1 |
Capex |
(12.4) |
(45.3) |
(31.9) |
(41.6) |
(5.1) |
Investments in financial assets/joint ventures |
(1.1) |
(3.8) |
(28.0) |
0.0 |
0.0 |
Equity financing |
9.4 |
34.9 |
28.8 |
20.0 |
0.0 |
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other |
(3.9) |
(3.3) |
0.0 |
0.0 |
0.0 |
Net Cash Flow |
12.1 |
(14.9) |
(16.4) |
3.7 |
24.9 |
Opening net debt/(cash), including lease |
24.3 |
12.2 |
27.2 |
43.6 |
39.9 |
Closing net debt/(cash), including lease |
12.2 |
27.2 |
43.6 |
39.9 |
14.9 |
Source: Accsys Technologies, Edison Investment Research
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