Stonegate Capital Partners Initiates Coverage on Aquafil Group (ECNL.MI)

DALLAS, TX -- October 10th, 2022 -- Aquafil Group (ECNL.MI): The full report can be accessed by clicking on the following link: https://stonegateinc.com/reports/ECNL.MI_Initiation_101022.pdf

COMPANY DESCRIPTION

Aquafil Group is a pioneer of the circular economy and a leading manufacturer of synthetic fibers and polymers, including Nylon 6, Nylon 6.6 and Dryarn®. Aquafil’s commitment to continuous research and development has set the standard for quality and product innovation worldwide and led to the discovery of ECONYL® nylon, a revolutionary nylon made of 100% waste and is 100% regenerable. Today, Aquafil is recognized as a sustainability leader, a stalwart example of the circular economy and an innovator dedicated to researching closed-loop systems for the synthetic fiber and polymer industry.

COMPANY SUMMARY

• A Pioneer in the Circular Economy – The Company is an industry pioneer in the circular economy through the ECONYL® Regeneration System, a proprietary process that transforms waste into endless possibilities through a chemical recycling process. The group collects post-consumer and industrial nylon 6 waste, such as fishing nets, carpets, and rugs. The nylon waste is cleaned, sorted, and processed to obtain a raw material, caprolactam, which is used to create new nylon with the same chemical and performance characteristics as nylon from fossil sources. The polymers produced from ECONYL® caprolactam are distributed to the Group’s production plants, where they are transformed into yarn for carpet flooring, apparel, and clothing.
• Aquafil is a Leader in Nylon Fibers –Aquafil manufactures and sells flooring yarns, Bulk Continuous Filament (BCF), apparel and clothing yarns (NTF), polymers and engineering plastics application (EP). The Company was originally founded to produce flooring yarn, Bulk Continuous Filament (BCF), with the segment making up about 61% of its revenue. It is the market leader in the production of BCF fibers.
• Market is Large and Growing – According to Research & Markets, the global textile yarn market is sized at US$11.9B in 2019 and is expected to grow to US$16.0B in 2026 for a CAGR of 4.0%. Within this market, synthetic yarns such as nylon and polyester are seeing increasing demand driven by consumers demand for high performance materials whether in clothing or upholstery applications that can increase comfort, resist stains, and/or easier to clean.
•  A Global Company – The Company has a strong global exposure with 19 production plants in eight countries across Asia, Europe, and North America. In February the Company established Aquafil Japan Co., Ltd., a 100% wholly owned subsidiary that has entered the market with strong demand for high quality products. Additionally, there is expected to be a significant increase in the Company’s presence in North America as it improves industrial efficiency in its existing plants, strengthening their production capacities.
• High Profile Partners – The Company is strategically partnered with high profile brands like Patagonia, Gucci, and Prada among others, who share the same circular vision and goals for sustainability.
• Upcoming U.S. Cross-Listing – The Company has started the process for a U.S. cross-listing on the OTCQX international segment. Management believes the introduction into the U.S. capital markets will be a major driver of growth and create great value for its shareholders, especially as the geographic region becomes more strategically important. This process is expected to be completed 4Q22.
• Valuation – Based on our F22 estimates and using an EV/EBITDA multiple range of 6.0x to 10.0x with a mid-point of 8.0x, we arrive at a valuation range of €5.62 to €12.11, with a midpoint at €8.86. See page 5 for more details.