DALLAS, TX -- May 19th, 2025 -- Aquafil Group (ECNL.MI): Stonegate Capital Partners updates coverage on Aquafil Group (ECNL.MI). In 1Q25, ECNL observed improved profitability despite significant macro environment uncertainty. The Company experienced a market recovery for fibers in the US, with increased sales of ECONYL® products. On a consolidated basis, ECNL reported improved EBITDA margins compared to 1Q24 despite lower revenue. This improvement is partly due to the increasing percentage of ECONYL® sales, which accounted for 60.5% of revenues generated from fibers in the first quarter. The Company also remains focused on debt repayment with a decreasing trend in net financial position, as evidenced by the NFP/EBITDA ratio remaining largely unchanged at 3.45x at the end of 1Q25 from 3.42x at the end of FY24.
Company Updates:
Quarterly results: ECNL reported revenue, adj EBITDA, and adj EPS of €146.9M, €17.1M, and €0.00, respectively. This compares to our/consensus estimates of €171.7M/€171.7M, €25.7M/€25.7M, and €0.08/€0.00, respectively. Revenues were impacted by a 2.0% decrease in volumes sold year over year, which was unable to overcome the strong results seen in the North America BCF segment. The largest year over year decrease in revenues was seen in EMEA as volumes dropped 1.9% contributing to a 7.3% decrease in revenues. Despite revenue headwinds, adj. EBITDA increased 12.2% from 1Q25 marking a significant improvement in profitability driven by improving gross profit margin.
Outlook: The Company is optimistic about growth through 2025 with order intake suggesting a positive trend in BCF and polymers. Profitability has significantly improved year over year, with first-quarter EBITDA margins exceeding 11% despite higher than expected energy costs, which has since subsided. Demand in the Asia Pacific and EMEA regions has met budget forecasts, and the U.S. market is showing signs of recovery beyond expectations. We continue anticipate continued profitability improvements and rising volumes in FY25 despite the continued market uncertainty.
ECONYL® Expansion on Track: The Company reported another quarter of strong ECONYL® contributions to revenues at 60.5% for 1Q25. This is an increase of 330 bps from 57.2% seen in 4Q24. We expect the North American market to see a rebound over FY25 as ECNOYL® continues to be an important portion of the Company’s revenue. This level of ECONYL® contribution to revenue is ahead of management’s expectations and is expected to remain a positive addition to the financials.
Valuation: We use both a DCF Model and EV/EBITDA Analysis to frame our valuation of ECNL. Our DCF analysis relies on a range of discount rates between 10.75% and 11.25%. This arrives at a valuation range of €4.86 to €5.27 with a mid-point of €5.06. Our EV/EBITDA analysis relies on a range of 6.0x to 7.0x leading to a valuation range of €3.85 to €4.92, with a midpoint at €4.39.
