Pirelli: Using 11% Free Cash Flow Yield To Reduce The Net Debt

seekingalpha11-22 23:30

Pirelli's share price is down 10% despite reaffirming its 2024-2025 outlook, with a current market cap of approximately 5.2B EUR.Financial results show a slight revenue increase and a 4.4% EBITDA ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2485267463?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/459028573/image_459028573.jpg","is_english":true,"pubTime":"2024-11-22 23:30","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2485267463","market":"sg","top_or_hot":-1,"title":"Pirelli: Using 11% Free Cash Flow Yield To Reduce The Net Debt","media":"seekingalpha","content":"<div>\n<p>Pirelli's share price is down 10% despite reaffirming its 2024-2025 outlook, with a current market cap of approximately 5.2B EUR.Financial results show a slight revenue increase and a 4.4% EBITDA ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739461-pirelli-using-11-percent-free-cash-flow-yield-to-reduce-the-net-debt\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Pirelli: Using 11% Free Cash Flow Yield To Reduce The Net Debt</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPirelli: Using 11% Free Cash Flow Yield To Reduce The Net Debt\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-22 23:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739461-pirelli-using-11-percent-free-cash-flow-yield-to-reduce-the-net-debt><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Pirelli's share price is down 10% despite reaffirming its 2024-2025 outlook, with a current market cap of approximately 5.2B EUR.Financial results show a slight revenue increase and a 4.4% EBITDA ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739461-pirelli-using-11-percent-free-cash-flow-yield-to-reduce-the-net-debt\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"PLLIF","symbol_name":"Pirelli S.p.A.","start_time":0,"source_url":"https://seekingalpha.com/article/4739461-pirelli-using-11-percent-free-cash-flow-yield-to-reduce-the-net-debt","article_id":"2485267463","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/459028573/image_459028573.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485267463","pubTimestamp":1732289400,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Pirelli's share price is down 10% despite reaffirming its 2024-2025 outlook, with a current market cap of approximately 5.2B EUR.Financial results show a slight revenue increase and a 4.4% EBITDA grow","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"PLLIF":"Pirelli S.p.A.","BK4119":"轮胎与橡胶"},"translate_title":"倍耐力：利用11%的自由现金流收益率减少净债务","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"PLLIF":0.9},"content_text":"Pirelli's share price is down 10% despite reaffirming its 2024-2025 outlook, with a current market cap of approximately 5.2B EUR.Financial results show a slight revenue increase and a 4.4% EBITDA growth, but net profit is impacted by higher financial expenses.Pirelli has tightened its 2024 guidance and expects improved EBIT margins and reduced net debt, with a new 50% dividend payout policy.Trading at less than 4.5 times EBITDA, Pirelli's valuation is attractive, and I may consider writing put options on the stock.   ManuelVelasco/iStock Unreleased via Getty Images Introduction As it has been almost five months since I last discussed Pirelli & C. S.p.A. (OTCPK:PLLIF), I figured it was time for an update as the Italian tire manufacturer has now published the financial results of two additional quarters since the previous article. As you may remember, I was charmed by Pirelli’s strong free cash flow yield and its interesting cash flow and EBITDA growth trajectory for 2024 and 2025. Although the company recently reconfirmed the outlook for both years, the share price is now trading approximately 10% lower than when my previous article was published. Yahoo FinancePirelli has its main listing in Italy, where it is trading with PIRC as its ticker symbol. The average daily volume is just under 2 million shares for a monetary value of just over 10M EUR per day. The current market capitalization is approximately 5.2B EUR as there are 1B shares outstanding. The company remains on track to perform as expected, despite a slowdown in the new car market Looking at the financial results as of the end of September, we see the company generated a total revenue of approximately 5.18B EUR, which is an increase of approximately 0.5% on a reported basis. Interestingly, the company’s adjusted EBITDA increased by 3.7% while the reported EBITDA showed a 4.4% increase from 1.09B EUR to 1.13B EUR (the adjusted EBITDA was approximately 1.16B EUR during the first nine months of the year). Pirelli Investor RelationsThe company also kept its depreciation and amortization expenses relatively flat (this wasn’t really a surprise), which boosted the reported EBIT by approximately 5.9% to 708M EUR. Unfortunately, the total amount of financial expenses increased by 50%, and that’s the sole reason why the pre-tax income fell by roughly 4% to 505M EUR. This resulted in a net profit of 371M EUR for an EPS of 0.35 EUR per share. Of that total attributable net income, approximately 140M EUR or 0.13 EUR per share was generated in the third quarter of this year. Keep in mind approximately 85% of the total increase in finance expenses could be explained by the impact of the devaluation of certain currencies and the accounting treatment of hyperinflationary economies. This had a negative impact of approximately 65M EUR and excluding this element, the total net finance cost would have increased by just 10M EUR (a substantially lower increase) and this would have allowed Pirelli to report a 3% increase in its pre-tax income. So while the net profit in H1 is slightly below expectations and slightly below last year’s result, the underlying result is definitely stronger than perceived, not in the least because the hyperinflation elements are a non-cash accounting treatment. Looking at the cash flow result, we see a reported operating cash flow of 33M EUR in the first nine months of the year, but this includes the impact of a net investment in the working capital position of almost 800M EUR. This means the adjusted operating cash flow came in at approximately 832M EUR before taxes and interest, and approximately 532M EUR after taking the cash interest expenses and cash tax payments into account. Pirelli Investor RelationsWhile slightly lower than in the same period last year, you can also see the company’s capex + lease payments came in at 325M EUR in 9M 2024 compared to just 270M EUR in 9M 2023. The guidance for 2024 and 2025 has now been narrowed down Pirelli has now also tightened its guidance for this year. As you can see below, the company now expects to generate a total revenue of 6.7B EUR and aims to generate an adjusted EBIT margin of 15.5%. That’s a very small revenue increase compared to last year but the higher adjusted EBIT margin will help to keep the net cash flow virtually unchanged. Whereas the company reported a net cash flow of 0.51 EUR per share in 2023, it is now aiming for a net cash flow of 0.50-0.52 EUR per share while the net debt should decrease to 1.95B EUR. Pirelli Investor RelationsI’m particularly pleased there are no additional tweaks to the FY 2025 guidance at this point. There will be additional revenue growth and although the growth rate is anticipated to be a low-single digit percentage, the adjusted EBIT margin is anticipated to increase even further to 16%, and this should result in a net cash flow result of 0.55-0.57 EUR per share. Also, important: Pirelli has upgraded its dividend policy and the company now aims to distribute 50% of its net profit as a dividend, which is an increase from the 40% payout ratio it was using before. By the end of next year, the total net debt should decrease to just 1.6B EUR and while this still sounds like a lot of money, it represents just 1 time the anticipated adjusted EBITDA. The combination of a lower net debt and a higher EBITDA result means Pirelli expects to reduce its debt ratio from 1.56 times EBITDA as of the end of last year to just 1x EBITDA by the end of next year. Investment thesis At the current share price of 5.13 EUR, Pirelli is trading with an enterprise value of 6.6B EUR (this includes the anticipated net financial debt by the end of this year but excludes the lease liabilities). Assuming the company indeed reaches an adjusted EBITDA result of 1.6B EUR (and approximately 1.5B EUR after taking the lease amortization into account), Pirelli is currently trading at less than 4.5 times its EBITDA and this ratio will decrease towards 4 by the end of next year as the net debt continues to decrease. I currently have no position in Pirelli, but I am following the stock from close by. I may decide to write put options on Pirelli.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485267463"}