Ferrari: All In Line (NYSE:RACE)

Our initial paragraph when we first analyzed Ferrari (NYSE:RACE) was stating – in the darkest hours and after the recent European sell-off, we see the best momentum to take advantage of what we forecast to be an unjustified 25% correction for the luxury segment. Well, we hope you were on board with us at that time. Over the period, we covered pretty well the company, here below our main analysis so you can get well acquainted with the story up to know:

• 09/03/2022 – Initiation of coverage with positive upside catalyst. We also include the valuation and Ferrari’s impact on Russia;
• 05/05/2022 – Q1 analysis
• 16/05/2022 – CMD follow-up. Despite short-term headwinds, we reiterated our positive view thanks to more product offerings & aim to maximize underline profitability with more personalization and unique features.

Looking ahead the half-year results

Starting from the newly appointed CEO comments:

Ferrari continues a phase of strong growth, with quarterly record results in terms of revenues, EBITDA and EBIT. The quality of the first six months and the robustness of our business allows us to revise upward the 2022 guidance on all metrics. Also, the net order intake reached a new record level in the quarter.

In numbers, Ferrari delivered 3.455 cars between April and June signing a plus 28.7% in comparison with the same period of the last year. All geographies have brought a positive contribution to the company deliveries during the quarter. To be specific, Mainland China, Hong Kong & Taiwan, the Americas, the Rest of APAC and the EMEA region recorded an increase of 115.7%, 62.2%, 21.4% and 4.5% respectively. This was in line with the strong demand expected and the increase in deliveries of the Portofino M and the F8 family.

Looking at the financials, net revenues grew by 25% to almost €1.3 billion with an EBITDA of €446 million up +15.5% and net profit stood at €251 million.

At the divisional level, revenues from cars and spare parts amounted to €1.1 billion, up by 25.0% thanks to the increase in volumes and customization contribution. Whereas there was a contraction in top-line sales from the supply of engines which stood at €41 million down by 8.5% compared to the previous year-end quarter. This is due to the decrease in engine deliveries to Maserati as the contract will soon expire (2023). A good performance was achieved in the sponsorships division, revenue achieved €117 million signing a plus 29.5%. This was driven by F1 better positioning championship and lifestyle activities contribution. However, performances were partially offset by lower sponsorships. Finally, FX development had a positive contribution estimated at more than €40 million.

Conclusion and Valuation

Regarding the valuation, our internal team was already ahead of the Wall Street analyst consensus estimate and, more in detail, expectations were forecasting a 10% downgrade on EBIT versus the Ferrari target.

In conclusion, Ferrari revised upward its estimates for 2022, forecasting higher revenue and better numbers in the adjusted EPS. Regarding the margins, EBIT and EBITDA, the Maranello house confirmed the midpoint of their guidance. This is all we wanted to hear. We expect that analysts will revise upward Ferrari’s valuation in the meantime, let’s enjoy the ride. Thanks to the just published results, we confirm our buy rating at $230 per share based on an EV/EBITDA multiple of 23x.