Leonardo stock in the dust on Piazza Affari (+ 4.05% to 6.724 euros) with the market discounting 2021 results in the high range of the company’s guidance and a constant progression in revenues this year. The Italian defense group, led by Alessandro Profumo, will publish the results of last year on 10 March after the market has closed. Management has already indicated on January 27 that 2021 orders, revenues and ebitda will be at the high end of the expected range with an operating free cash flow of around 200 million euros or double the initial guidance.
Mediobanca Securities also expects the company to provide its first guidance for the year 2022. “After marginally reducing our 2022/2023 earnings estimates (to € 704 million for this year from the estimated 535 for 2021, 241 million in 2020 ed), we expect Leonardo to indicate a constant growth in revenues of 3% to 14.7 billion with an EBIT of 1.221 billion. 7.9% estimated for 2021. We also foresee an operating free cash flow of 379 million euros which leads to a net debt of 3.5 billion euros and a financial leverage of 1.9x “, underlined the bank d ‘ business.
However, “we believe that the weakness of the Aerostructures division and limited visibility on the timing of divestments, necessary to offset the financial impact of the Hensoldt acquisition, will remain a drag on action in the short term,” he warned, adding that the consensus already expects a significant increase in cash flow this year.
More specifically, at the end of 2021 Mediobanca expects order intake of € 14 billion, in line with the company’s guidance and the consensus estimate, and revenues of € 14.3 billion from € 13.41 billion in 2020 ( 13.8-14.3 billion guidance, 14.1 billion the consensus estimate). This translates into an EBIT of 1.125 billion (1.075-1.125 billion guidance). The investment bank has also estimated an operating free cash flow of 226 million (around 200 million the guidance) with a net debt of 3.2 billion, in line with the guidance and therefore a financial leverage at 1.8x from 2, 3x of 2020.
Estimates, those of Mediobanca, almost in line with the recent update of the company which has, in fact, indicated revenues and EBITDA in the highest range of guidance. “We believe the 6.3% year-over-year growth in revenue will be supported by defense electronics growth, + 8.5% year-over-year, while delivering a double-digit Ros-level margin of 10%. from 8.2% of the fiscal year 2020, and also from the helicopter division, + 7% year on year but with a margin at the level of flat Ros of 9.6% “, specified Mediobanca.
During the third quarter of last year, Leonardo’s management highlighted the strong momentum of the military-government business, a resilient market for civil helicopters and signs of recovery from the Aerostructures division, with 2021 likely to be the worst year for this. division in difficulty. Management now expects it to break even in EBIT and cash in 2025, on the back of higher volumes for the B787. In the short term, its recovery is likely to be supported by Airbus programs (ATR, A321, A220), seen to grow to pre-Covid levels in 2022/2023.
From the valuation point of view, after having trimmed the earnings estimates and also updated the multiples for the sector, Mediobanca lowered the target price on the Leonardo share by 4% to 6.9 euros. “According to our estimates, Leonardo trades at a 2022 price / profit multiple of 5.3 times, with a significant discount of 70% compared to the average of its competitors, but we maintain the neutral rating”, concluded Mediobanca. Those who bet on the share are Kepler Cheuvreux who, unlike Mediobanca, today raised the target price on Leonardo from 9.1 to 9.7 euros, confirming the buy recommendation, expecting at the publication of the 2021 accounts that the group will highlight that the improvement in cash flow will continue. (All rights reserved)

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