Note de recherche Capital Système du 14.11.2014

LUCIBEL
Update November 14, 2014
Rating
Target Price
Technical Sell-Off
Key Data
A significant sell-off by early stage investors has impacted Lucibel’s stock
price after the July 16th IPO, before stabilising at around € 8.00 in the
second half of August. Following the H1 and Q3 announcements the stock
continued to decline. While we believe that a large part of the exiting
shareholder block has been sold off, Lucibel’s stock will depend on positive
announcements to stimulate demand and inverse the trend.
Current Price
Market Cap
Outstanding Shares
Free Float
Sector Valuations
Since Lucibel’s IPO, valuations in the LED sector have been corrected
substantially, decreasing on average about 20% and in some cases up to
30%. The global growth of the LED market remains undisputed, but
increasing pricing pressure arises from Chinese manufacturers in the B2C
light source segment, dragging along the B2B luminaires market on which
Lucibel is present, despite not necessarily facing the same challenges.
While stock markets lately remained cautious, analysts continue to
underline the potential of LED market leaders, both B2B and B2C.
Buy
€ 7.00
€ 4.66
€ 35m
7.6m
53%
Name of shares
Lucibel
ISIN code
FR0011884378
Mnemonic
ALUCI
Compartment
Alternext
Financials
Macroeconomic Impact
The current macroeconomic pressure on Lucibel’s home market in France
leads to longer than expected sales cycles and a decrease in average
project size. However, Lucibel’s pipeline remains strong and recently
signed contracts (e.g. with the city of Istres) indicate that leads are being
transformed, also as a result of a strengthening sales organisation.
International Focus
Given the disparate results across geographies we expect Lucibel to adopt
a more selective approach and focus on markets with a proven potential in
Europe, the Middle East, North Africa and Asia rather than launching many
additional countries. This potentially includes partnerships with large local
players to facilitate the market entry and initial ramp-up of revenues.
Maturing Organisation
While in 2014 a significant share of senior management resources have
been dedicated to the IPO, Lucibel has managed to integrate earlier
acquisitions and the Barentin production site, reduced its indirect cost base
in line with its ambitious EBITDA targets and thus laid the foundations for
a next wave of growth. We have revised our forecast, but expect Lucibel to
find back to above market level growth in 2015 and believe on that basis
an EBITDA break-even in H2 2015 is still achievable.
Company Description
Established in 2008, Lucibel is
specialised in the design and
distribution
of
innovative
lighting solutions based on LED
(light-emitting
diode)
technology. The Group is positioned
on multiple professional market
segments (shops, hospitality,
offices, museums and the
public sector), where its LED
solutions
provide
maximum
value for its clients.
Lucibel achieved a consolidated
turnover of € 21.5m in 2013
against € 6.3m in 2012. The
Group has a total workforce of
204 FTEs, divided between the
parent
company
and
its
subsidiaries, including seven
international subsidiaries.
This report has been prepared by Capital Système Investissements. Please read the warning information and disclosures on page 5.
Capital Système Investissements is a Euronext Alternext listing sponsor and is regulated in Switzerland by the OAR-G and the GSCGI.
FORECAST
Following the H1 and Q3 announcements we have adapted our forecast for Lucibel’s organic
growth in the LED general lighting market (see also appendix for a detailed revenue forecast).
France
Lucibel’s historical B2B business is facing macroeconomic challenges in France with longer than
expected sales cycles and smaller average order size. Driven by a reinforced sales organisation,
a continuously strong pipeline and new product launches in Q4 2014 we expect a return to above
market growth of 25-30% until 2017.
International
Following the evolution from a trade to a project-based business, we expect Lucibel to adopt a
more selective approach and focus on geographies with a proven potential in Europe (e.g.
Benelux, Switzerland), the Middle East (e.g. UAE, Saudi Arabia), North Africa and Asia.
Financial Forecast Summary
(1) Operating income from ordinary activities after employee stock compensation expense
Source: Company reports, CSI estimates
While Lucibel’s initial growth targets might be delayed, the underlying sustained LED growth
trend cannot be ignored, also assisted by a supportive regulatory environment and the ongoing
replacement of incandescent lighting. Our revised revenue forecast somewhat benefits EBITDA
and income estimates as the higher gross margin average in France (i.e. including Hallier)
compared to the now slower anticipated growth internationally and lower working capital
requirements (i.e. less rapid growth) combined with an indirect cost base reduction in H2 2014
help to improve the bottom line.
Lucibel – 14 November 2014
Page 2
VALUATION
Taking into account our updated forecast, a terminal growth rate of 3-4% and a WACC of 11.5%,
our DCF valuation suggests an EV for Lucibel of € 52m, corresponding to a share price of € 7.00.
On a multiples basis, the target price of € 7.00/share equates to 2.1 x EV/Revenues 2014 and
1.7 x EV/Revenues 2015. The below comparison table highlights a number of comparable LED
lighting players. We excluded companies with a large amount of non-LED business in their
product mix (i.e. Legrand, Hubbell, Havells).
Compared to our initial analysis from June 2014, LED sector valuations have been significantly
corrected: for our sample on average by 20% and in some cases by more than 30%. This applies
to both stock prices and performance multiples. While stock markets remained cautious lately,
analysts continue to underline the potential of LED market leaders, in both the B2B and B2C
segment (e.g. Lumenpulse trading at CAN 13.82 with a target price of up to CAN 29.00; Osram
trading at € 30.79 with a target price of up to € 41.00 - € 48.00).
LED Peer Group Valuation
Source: Bloomberg, Capital IQ, CSI estimates. As of 11.11.2014. Values in local currency
We believe that medium-term Lucibel can attract a valuation in line with its peer group balancing
above-average growth prospects with a slightly higher risk profile. An additional premium can be
expected if top line expectations are met and EBITDA breakeven can be achieved in H2 2015.
Lucibel – 14 November 2014
Page 3
APPENDIX
Revenue Forecast (Organic Growth)
Source: Company reports, CSI estimates
Lucibel – 14 November 2014
Page 4
Capital Système Investissements S.A
7, rue de la Croix d’Or
CH – 1204 Geneva
Dr. Johannes Schmohl
[email protected]
+41 22 840 07 76
Stock Ratings
Buy:
Hold:
Sell:
10% or greater increase in share price expected over 12 months.
Between -10% and 10% change in share price expected over 12.
More than 10% decrease in share price expected over 12 months.
Potential Conflicts of Interest
Corporate
Finance
Share Holding
of Analyst
Share Holding
of CSI
Prior Communication
to Lucibel
Market
Making
Yes
No
No
No
No
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recommendations or views in this report.
Lucibel – 14 November 2014
Page 5