Our internal team has a good grip on Ferrari (NYSE:RACE), in 2022, we reiterated our buy rating targets multiple times, providing insights and key details on the main company’s development. Today, we are back to comment on its quarterly release, and once again, Ferrari raised the bar, increasing its financial records.
In 2022, Ferrari delivered 13.221 cars, an increase of 2.066 units or 18.5% over the previous year. This positive trend was mainly driven by the Ferrari Portofino M and the SF90 family as well as by the acceleration phase of the 296 GTB and the 812 Competizione. While Ferrari Monza SP1 and SP2 decreased on a yearly basis (in line with estimates) and the Daytona SP3s just started their deliveries in 2022 Q4. For the year, the company’s product portfolio included nine internal combustion engine models and three hybrid engine models, which accounted for 78% and 22% of total deliveries, respectively. Looking at the company’s P&L, Ferrari’s net revenues reached €5.1 billion in 2022, up 19.3% or 15.5% at constant exchange rates. Top-line sales from automobiles and spare parts totaled €4.3 billion (up 21.5% or 17.8% at constant exchange rates), thanks to higher volumes and higher customizations contribution. EBITDA margin stood at 34.8% and in the period, net profit recorded €939 million, up 12.7% from the previous year, and diluted earnings per share reached €5.09 compared to €4.50 delivered in 2021.
Source: Ferrari Q4 and FY results
Cross-checking the details, volumes had a strong positive impact (€261 million), reflecting the increase in deliveries compared to the previous year. Industrial and research and development costs showed an increase of €116 million mainly due to higher depreciation and inflationary costs (including energy). Ferrari delivered a strong industrial free cash flow at €758 million thanks to advances on the Daytona SP3 and 812 Competizione; however, this was partially offset by capital expenditures at €806 million and taxes.
Conclusion and Valuation
Starting with the CEO’s words, “despite a complex global macro scenario, Ferrari looks ahead with great confidence, encouraged by the many signs and achievements of an evolving company“. Here are our key takeaways:
- The new order intake is still very solid;
- While Ferrari was targeting an EBITDA between €1.8 and 2.0 billion for 2023, we were increasingly confident in higher estimates. 2023’s new guidance was positively welcomed (Ferrari stock price is up by 3%);
- Rolling Forward our 2024 EBITDA estimates and valuing Ferrari with its historical EV/EBITDA average of ~21, we derive a target price of $280 per share;
- Related to point 3, using luxury multiples of LVMH and Hermes, the Italian company is trading at a lower target price;
- The company is still lagging in F1 and last year, the company was racing without its largest sponsorship. Here at the Lab, we now assume that this spot is going to be filled for the 2023 F1 season;
- Ferrari will join the Le Mans Endurance Championship and this should add additional racing revenues;
- Looking at the €/$ development, FX might be a negative consideration in 2023; however, we estimate a very minimal effect in our numbers (already included in our target price);
- The new Ferrari plant will add 15 new cars, but we should be ready to potentially see 2-3 new cars in 2023 (not yet disclosed).