Van het Engelse forum:
Full Stifel Research Note below March 18, 2022 Looking beyond next week's update: upgrading estimates, trading and long-term buyers Summary We are trading buyers and long-term fundamental buyers of Renewi ahead of its scheduled Q4 trading update on 22 March. Back in late January, management guided to at least EUR 120m of EBIT (last year EUR 73m), and with commodity prices subsequently seeing further inflation, we think a reasonable beat is to be expected. We are upgrading our estimates due to persistently higher recyclate prices and continued confidence that management can deliver on its business improvement plans. We have increased our price DCF-based price target from 905p to 1100p (66% upside) as a result of rolling forward the target by one year and increasing earnings estimates. We think that an 8.7x P/E and 4.4x EV/EBITDA multiple is too low and the risk is asymmetrical, good value. Key Points Renewi issued a trading update in late January citing continued strength in its core business, plus continued strong commodity pricing benefiting the business through recyclate sales. The guidance for the year ending March 2022 was for underlying EBIT of at least EUR120m up 64% YoY from EUR 73m in FY21. The core business is guided to see profits improve from EUR 73m to EUR 80m - there was no material commodity price benefit in FY21 - with a EUR 40m benefit from elevated commodity pricing benefiting EBIT by EUR 40m. Looking at the base business suggests a conservative consensus by March '25: Management has guided, we believe conservatively, to EUR 60m of incremental EBIT in 2025 from cost base self-help and innovation investment earnings. With a FY21E base business EBIT of EUR 80m, then just from self help and innovation investments we are looking at base business EBIT of: FY23E EUR 100m - pre-recylate contribution or growth in the base business FY24E EUR 120m - pre-recylate contribution or growth in the base business FY25E EUR 140m - pre-recylate contribution or growth in the base business The high recylate pricing mean revert may not be swift: Recylate prices inflated in-line with commodities last year (the two key ones for renewi ar Ferrous Metals and Wood). Continued high energy prices mean that the costs of virgin Ferrous metal will remain high. With the oil price significantly higher now that the start of Renewi's FY22E year (March) there is the possibility of the contribution from recylates in FY23E being higher than in FY22E. For our earnings forecast revision we now assume elevated prices for a material period of FY23E contributing EUR 15m (versus EUR40m in FY22E), but in none of the other forecast years. Adding organic growth of EUR 5m of incremental EBIT p.a. results in the following new estimates: FY23E EUR 120m (previously EUR 108m - Bloomberg cons. EUR 116m) FY24E EUR 125m (previously EUR 109m - Bloomberg cons. EUR 120m) FY25E EUR 150m (not previously published - Bloomberg cons. EUR 133m)