The threat of the Omicron variant on short-term travel volumes depresses the performance of Autogrill, whose shares at Euronext Milan are today down by almost 5% to € 5.678. Although the group posted a generally stronger-than-expected performance in the fourth quarter, Citi expects “this momentum to slow down in the first quarter and reduce the expected 2022 EBIT from 93 million to 48 million euros”, adding to continue to expect a recovery from next year onwards, and to have slightly changed the forecasts for 2023. “We maintain our target price of 3.6 euros and the sell rating which reflects the elongated valuation metrics of the group (32 times the price / profit ratio expected to 2023).
However, analysts continue to favor rival SSP, “which offers better revenue momentum, driven by substantial net gains on contracts and a more convincing valuation basis (20 times the expected price / earnings ratio by 2023)”. Although difficult to assess, the US bank’s forecasts reflect some impact of the Omicron variant, “in line with our approach to SSP”. Overall, experts assume that revenues in the first half of 2022 “are 63% of the levels of 2019 (against a previous estimate of 71%,) compared to 61% in the second half of 2021”. Furthermore, even in the face of an alleged 20% drop in revenues which “brings our ebit forecast from 93 million to 48 million euros (against the consensus of Refinitiv to 84 million)”,
Citi believes Autogrill’s revenue prospect “is less convincing than SSP’s”: although similar assumptions have been made on both companies about the post-Covid recovery, experts highlight a difference in the net earnings of the contract. For Autogrill, in fact, “it is probable that the combination of sales and contractual exits will leave revenues expected in 2024 at only 91% of 2019 levels, even after the post-pandemic recovery, while the rival SSP” confirmed the probability that its recent m & a operations add about 15% to its pre-Covid-19 base. ”
Furthermore, for analysts, the ambition of Autogrill’s management to reach an ebit margin of 6% (+140 basis points compared to 2019) by 2024 “driven by the rationalization of the portfolio, of the items managed in the warehouse and workforce efficiency “. Although this proven model has proven effective for the competitor SSP, Citi believes that in the case of the Italian company a demanding management will have to be put in motion, and “we have yet to see clear evidence that it is achievable. We therefore prefer to assume a margin closer to the level. in 2019 of 4.6% (against a level of 4.8% expected in 2024); on the contrary, experts predict that “the ebit margins of SSP will reach 6.8% that year, in any case below its previous peak of 7.9%,
For Citi experts, the assessment remains problematic: “Autogrill shares trade at 32 times our expected earnings per share in 2023 estimated at 18 cents (against a consensus of 23 cents); this rating seems generous to us, considering the historical norms for Autogrill and its peers in concession (about 10-25 times) “, while Ssp trades at about 20 times the price / profit ratio as of 2023.” Our unchanged target price of 3.6 euros derives from the application of a multiple of 20 times the price / earnings ratio to our forecast of 17.9 earnings per share expected at 2023 of 17.9 cents, corresponding to the historical correlation between earnings growth and multiples in the sector “.
Earnings per share appear strongly oriented towards recovery hypotheses: it is estimated that a faster recovery of revenues of 1% is equivalent to an impact on earnings per share of 7-8%, which is why experts believe that multiples of the price / profit ratio are “considerably higher than their rival SSP, not taking into account the highly uncertain nature of the recovery hypotheses, the risks of structural deterioration of business travel and the potential economic repercussions of Covid-19”.
Ultimately, Citi confirmed a target price of 3.6 euros estimated on the basis of 20 times the price / earnings ratio, which “reflects our expectation of a further recovery in earnings in 2024. We see upside risks for our target. price from a stronger-than-expected economic recovery that could be stimulated by a stronger post-pandemic travel recovery: the operational and financial mechanism leaves Autogrill’s earnings per share strongly oriented towards revenue recovery “. Experts also see upside risks for ebit margins and hypothesize “margins of 4.7% expected by 2024, essentially in line with previous peaks, but below management’s 6% target and historical margins of SSP to almost 8% “. (All rights reserved)
