Symrise AG Germany | Chemicals | MCap EUR 13,461m
11 March 2021 INITIATION
Sustained sales and HOLD (na) Target price EUR 100.00 (none) Current price EUR 99.40 earnings growth, despite Up/downside 0.6%
macro headwinds
What’s it all about?
Symrise reported reliable results in an exceptional year (2020), with a marginal miss in sales guidance amid the cyber-attack in late Q4 2020 and EBITDA in line. Organic sales growth is expected to accelerate this year, as pandemic-related headwinds are likely to ease and business activities have normalised following the cyber-attack. Moreover, mid-term targets seem achievable on an expanded portfolio and planned integration of MAIN AUTHOR the Flavor and Nutrition divisions, which may offer strong cross-selling opportunities. Thomas Wissler We initiate our coverage with a HOLD recommendation and a PT of EUR 100.00, based [email protected] on our DCF model. +49 40 309 293-58
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Symrise AG
Germany | Chemicals | MCap EUR 13,461m | EV EUR 15,468m
MAIN AUTHOR HOLD (na) Target price EUR 100.00 (none) Current price EUR 99.40 Thomas Wissler Up/downside 0.6% [email protected] +49 40 309 293-58
Sustained sales and earnings growth, despite macro headwinds
Despite COVID-19-induced slippages in consumer demand across segments and cybersecurity attack in December 2020, Symrise continued to post healthy sales and
earnings, given its highly differentiated business model. Strong operating performance and free cash flow (FCF) generation in 2020 prompted the company to increase dividends further. Moreover, the temporary shut down of major businesses from cyber-attack have been largely resolved and the operations are now restored.
Symrise reported 3.3% yoy growth in 2020 sales to EUR 3.5bn (2% below analyst expectations), mainly driven by portfolio effect (+5.1%, with the total contribution from Source: Company data, AlsterResearch American Dehydrated Foods/International Dehydrated Food “ADF/IDF” at EUR 209m), partly offset by adverse currency effects (-4.5%). Organic sales also grew 2.7% yoy High/low 52 weeks 121.05 / 71.20 (as pre-announced; beating the industry average of ca +1%), despite COVID-19-led Price/Book Ratio 5.8x disruptions. However, it fell behind 3-4% guidance, due to slower sales development in Q4 as a result of the cyber-attack in mid-December. Consequently, organic sales Ticker / Symbols inched up a muted 0.7% yoy in Q4 (reported: -4.6% yoy to EUR 818m). The latest ISIN DE000SYM9999 company presentation and full year report can be found under www.research- WKN SYM999 hub.de. Bloomberg SY1:GR
Segment-wise, in 2020, Nutrition witnessed the highest organic growth of 8.2% yoy Changes in estimates (reported: +26.6% yoy to EUR 926m, mainly led by higher contribution from ADF/IDF; Sales EBIT EPS Q4: +6.2% yoy organically) on strong performance of pet food, growing across 2021 old 00.0 00.0 00.0 regions. Organic sales in Scent and Care were up 1.5% yoy (reported: -3.5% yoy to EUR ∆ – – – 2022 old 00.0 00.0 00.0 1.4bn; Q4: -3.2% yoy organically), aided by pandemic-led solid demand for personal ∆ – – – care and hygiene products. Meanwhile, Flavor sales grew a mere 0.7% yoy organically 2023 old 00.0 00.0 00.0 (reported: -2.6% yoy to EUR 1.2bn; Q4: +1.2% yoy organically) on softer demand for ∆ – – – sweets and beverages. - continued - Key share data Symrise AG 2018 2019 2020 2021E 2022E 2023E Number of shares: (in m pcs) 135 Sales 3,154 3,408 3,520 3,711 3,918 4,148 Book value per share: (in EUR) 17.00 Growth yoy 5.3% 8.0% 3.3% 5.4% 5.6% 5.9% Ø trading volume: (12 months) 70,000 EBITDA 631 685 742 804 816 837 EBIT 434 455 488 560 592 626 Major shareholders Net profit 279 295 311 375 402 432 Horst-Otto Gerberding 5.2% Net debt (net cash) 1,365 1,599 1,325 1,097 826 564 Canada Pension Plan 5.0% Net debt/EBITDA 2.2x 2.3x 1.8x 1.4x 1.0x 0.7x Massachusetts FS 3.5% EPS recurring 2.15 2.19 2.30 2.77 2.97 3.19 Free Float 80.0% DPS 0.90 0.90 0.95 1.17 1.25 1.35 Dividend yield 0.9% 0.9% 1.0% 1.2% 1.3% 1.4% Company description Gross profit margin 39.4% 39.9% 39.5% 41.0% 41.0% 41.0% Symrise AG is a Germany-based EBITDA margin 20.0% 20.1% 21.1% 21.7% 20.8% 20.2% supplier of fragrances, flavorings, EBIT margin 13.8% 13.4% 13.8% 15.1% 15.1% 15.1% ROCE 10.2% 8.6% 9.3% 11.3% 11.8% 12.4% cosmetic active ingredients, raw EV/EBITDA 24.3x 22.9x 20.8x 19.0x 18.4x 17.7x materials and functional ingredients, as EV/EBIT 35.3x 34.4x 31.7x 27.3x 25.4x 23.7x well as sensorial and nutritional PER 46.2x 45.4x 43.3x 35.9x 33.5x 31.1x solutions. The Company operates FCF yield 1.9% 2.3% 2.8% 2.3% 2.9% 3.1% through three segments: Flavor, Source: Company data, AlsterResearch Nutrition, as well as Scent and Care.
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Although gross margin narrowed to 39.5% (-40bps yoy), EBITDA increased 5.8% yoy to EUR 742m, leading to a margin of 21.1% (vs normalized margin of 20.6% in 2019; in line with management guidance of low end of 21%-22%). Contributions from ADF/IDF and lower travel and research & development costs amid the pandemic supported the EBITDA growth. As a result, EPS reached a record high of EUR 2.27 (+3.0% yoy). Business FCF was up 18% yoy to EUR 564m (16.0% of sales vs 14.1% in 2019), 2% ahead of consensus, as it benefited from lower working capital due to a decline in inventory and impact of the cyber-attack. Management raised its dividend per share by 2.1% yoy to EUR 0.97 for 2020 (43% payout, in line with the long-term target of 30%-50%), anchored by strong business development.
Guidance: For 2021, Symrise is targeting organic sales growth of 5-7% yoy, EBITDA margin of 21%, despite rising raw material costs, and business FCF of more than 14% of sales. Management reiterated its outlook on annual sales growth at 5-7% and EBITDA margin at 20-23% over the medium term (by 2025E).
Conclusion: Symrise reported reliable results in an exceptional year (2020), with a marginal miss in sales guidance amid the cyber-attack in late Q4 2020 and EBITDA in line. Organic sales growth is expected to accelerate this year, as pandemic-related headwinds are likely to ease and business activities have normalized following the cyber-attack. Moreover, mid-term targets seem achievable on an expanded portfolio and planned integration of the Flavor and Nutrition divisions, which may offer strong cross-selling opportunities. We initiate our coverage with a HOLD recommendation and a PT of EUR 100.00, based on our DCF model.
Half year reporting table
P&L data 2H2017 1H2018 2H2018 1H2019 2H2019 1H2020 2H2020
Sales 1.481 1.575 1.579 1.692 1.716 1.821 1.699 yoy growth in % na 4,0% 6,6% 7,4% 8,7% 7,6% -0,9% Gross profit 597 631 611 692 668 730 660 Gross margin in % 40,3% 40,0% 38,7% 40,9% 39,0% 40,1% 38,9% EBITDA 307 317 313 342 343 393 349 EBITDA margin in % 20,8% 20,1% 19,9% 20,2% 20,0% 21,6% 20,5% EBIT 207 220 214 232 224 266 222 EBIT margin in % 14,0% 13,9% 13,6% 13,7% 13,0% 14,6% 13,0% EBT 174 200 189 204 206 237 187 taxes paid 44 56 54 55 57 64 45 tax rate in % 25,1% 28,0% 28,3% 27,0% 27,5% 27,0% 23,9% net profit 130 142 137 146 149 169 142 yoy growth in % na 0,4% 5,0% 2,6% 8,8% 15,9% -4,9% EPS 1,00 1,10 1,02 1,09 1,10 1,25 1,05 Source: Company data; AlsterResearch
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Company background
THE COMPANY Symrise is a global supplier of fragrances and flavours, cosmetic ingredients, functional ingredients and solutions for food production based on natural raw materials. With sales of €3.4 billion in the 2019 financial year and a market share of around 10%, the company is one of the world's leading players in the fragrances and flavours market. The group, headquartered in Holzminden, is represented worldwide with more than 100 locations. The Symrise Group was originally formed by the merger of the two German companies Haarmann & Reimer and Dragoco in 2003. Symrise's roots go back to 1874 and 1919 respectively, when the predecessor companies were founded. Symrise AG went public in 2006. Since then, Symrise has been listed in the Prime Standard of the German Stock Exchange and, with a market capitalisation of around 12.7 billion euros at the end of 2019, is one of the companies listed in the MDAX.
PORTFOLIO Symrise AG's portfolio is made up of three segments: Flavor, Nutrition, Scent & Care. The Flavour segment includes the Beverages, Savory and Sweet application areas. The Nutrition segment consists of the Diana division with the application areas Food, Pet Food, Aqua and Probi as well as the US company ADF/ IDF, which was acquired in November 2019. The Scent & Care segment comprises the business units Fragrance, Cosmetic Ingredients and Aroma Molecules.
Portfolio
Source: Company data; AlsterResearch
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SALES BY SEGMENTS In terms of sales, the Scent & Care segment achieved the highest sales with 1,419 million euros, followed by the Flavor segment with 1,257 million euros and the Nutrition segment with 732 million euros.
Sales by Segments
Scent & Care Flavor 42% 37%
Nutrition 21%
Source: Company data; AlsterResearch
SALES BY REGION Symrise generated its largest sales in the EAME region in the 2019 financial year with around 1,430 million euros. In North America, the company achieved sales of 809 million euros, followed by the Asia/Pacific region with 758 million euros and Latin America with 411 million euros.
Sales by Region
Latin America 12%
EAME 42% Asia/ Pacific 22%
North America 24%
Source: Company data; AlsterResearch
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LOCTAION With over 100 locations in more than 40 countries in Europe, Asia, North and Latin America and Africa, the global presence and proximity to the customers enable Symrise to offer a constantly updated range of products and services, even in dynamic markets.
Location
Source: Company data; AlsterResearch
CUSTOMERS Its customers include perfume, cosmetics, food and beverage manufacturers, the pharmaceutical industry and producers of food supplements and pet food.
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MANAGEMENT The management is composed of the following members: Dr Heinz-Jürgen Bertram, Olaf Klinger, Achim Daub, Heinrich Schaper and Dr Jean-Yves Parisot.
Management
Dr Heinz-Jürgen Bertram, Olaf Klinger, Achim Daub, Heinrich Schaper, Dr Jean-Yves Parisot, Chairman of the Management Management Scent & Management Flavor Management Nutrition Management Finance Care Board
Source: Company data; AlsterResearch
Dr Heinz-Jürgen Bertram After obtaining his doctorate in chemistry in 1987, he took on various management functions in the field of research in the Bayer Group, the Haarmann & Reimer Group and Symrise GmbH & Co KG. In 2003, he took over the global management of the Aroma Chemicals Division at Symrise GmbH & Co KG. In 2004 he became head of operations at the same company. In 2006 he took over the global management of the Flavor & Nutrition Division at Symrise AG. He has been a member of the Executive Board since December 2006 and Chairman of the Executive Board of Symrise AG since August 2009.
Olaf Klinger Before starting his career with well-known companies, Mr Klinger graduated in business administration in 1992. For three years he worked in the finance department at Mannesmann AG until he took over the management of the treasury department for Mannesmann Corp./USA in 1996. In 2002, he moved to Merck KGaA and became head of the global finance organisation. In 2015, he became CFO of the AMEOS Group in Switzerland. Since 2016 CFO of Symrise AG.
Achim Daub After graduating with a degree in economics in 1990, he held various positions within the Procter & Gamble Group. In 2001, he moved to Coty GmbH, where he was Managing Director for the DACH region. Since 2004, he has held various positions and countries within the Symrise Group. Since December 2006, he has been a member of the Executive Board of Symrise AG and is responsible for the Scent & Care division.
Heinrich Schaper Mr Schaper has been with Symrise since 1976. After training as an industrial clerk, he initially started his career as a sales manager for flavours. In 1985, he took over the management of flavour sales in Europe, later in the UK. In 1997, he became Vice President Flavours in the USA. In 2000, he became Regional Manager Flavours EAME. Since October 2016, he has been responsible for the Flavour division as a member of the Executive Board.
Dr Jean-Yves Parisot After his studies in veterinary medicine and MBA at HEC Paris, Mr Parisot started his career in sales and marketing at Pfizer. From 1996 to 2000, he was Managing Director of Rhone Poulenc in Poland. In 2004, he joined Dansico as Vice President Global Marketing & Sales Development. In 2009, he took over as Head of the Food Division at Diana. since 2014, he has been Head of the Diana Division at Symreise. two years later, he is a member of the Board of Directors responsible for the Nutrition Division.
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SUPERVISORY BOARD The Supervisory Board is composed of the following 12 members: Michael König, Ursula Buck, Harald Feist, Horst-Otto Gerberding, Jeannette Härtling, Bernd Hirsch, André Kirchhoff, Gerd Lösing, Prof Dr Andrea Pfeifer, Andrea Püttcher, Peter Vanacker and Peter Winkelmann.
SHAREHOLDER STRUCTURE The shareholder structure is as follows: 95% is held by the free float, while around 5% belongs to Horst-Otto Gerberding.
Shareholder Structure
Horst-Otto Gerberding 5%
Free Float 95%
Source: Company data; AlsterResearch
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HISTORY
History
Source: Company data; AlsterResearch
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Valuation
The DCF model results in a price target of EUR 99 per share. Key model assumptions:
• Top-line growth: We expect Symrise to continue benefitting from structural growth. Hence our growth estimates for 2021-28E is in the range of 5% p.a.
• The long-term growth rate is set at 2.5%.
• EBIT margins. The scalable business model should allow for EBIT margins of 15%, which look defendable given high competitive quality based on scale geography and expertise. Accordingly, we model approx. 15% EBIT margins in the long-term.
• WACC. We model a weighted average cost of capital of 6% to reflect the mature stage of the business model, consisting of a 5.0% risk premium beta of 1.0x and 3.5% risk free rate.
DCF (EUR m) Terminal 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E (except per share data and beta) value NOPAT 417 440 466 491 516 542 569 597 Depreciation 243 224 211 202 196 194 194 195 Change in working capital -117 -66 -73 -73 -70 -73 -77 -81 Chg. in long-term provisions 48 52 57 57 55 57 60 63 Capex -163 -172 -182 -192 -201 -211 -222 -233 Cash flow 428 478 479 486 496 508 524 542 17,859 Present value 410 433 410 393 380 369 360 353 11,660 WACC 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 5.7% 5.6%
DCF per share derived from DCF avg. growth and earnings assumptions Planning horizon avg. revenue growth (2021E - 2028E) 5.3% Total present value 14,766 Terminal value growth (2028E - infinity) 2.5% Mid-year adj. total present value 15,180 Terminal year ROCE 13.9% Net debt / cash at start of year 1,325 Terminal year WACC 5.6% Financial assets 241 Provisions and off b/s debt 681 Terminal WACC derived from Equity value 13,415 Cost of borrowing (before taxes) 5.0% No. of shares outstanding 135.4 Long-term tax rate 25% Equity beta 0.45 Discounted cash flow per share 99.05 Unlevered beta (industry or company) 0.60 upside/(downside) -0.3% Target debt / equity 0.0 Relevered beta 0.60 Risk-free rate 2.0% Equity risk premium 6.0% Share price 99.40 Cost of equity 5.6%
Sensitivity analysis DCF
Long term growth Share of present value
73,1 1.5% 2.0% 2.5% 3.0% 3.5%
1.0% 59.5 65.2 72.3 81.3 93.1 2021E - 2024E 11.1%
0.5% 67.3 74.5 83.8 96.0 113.0 2025E - 2028E 9.9%
points)
- 0.0% 76.9 86.4 99.0 116.5 142.2 terminal value 79.0%
(% -0.5% 89.1 102.1 120.1 146.6 189.5 Change in WACC in Change
-1.0% 105.3 123.8 151.1 195.3 279.3
Source: AlsterResearch
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Due to the fact that companies rarely bear sufficient resemblance to peers in terms of geographical exposure, size or competitive strength and in order to adjust for the pitfalls of weak long-term visibility, an Adjusted Free Cash Flow analysis (Adjusted FCF) has been conducted.
The adjusted Free Cash Flow Yield results in a fair value between EUR 43.00 per share based on 2021E and EUR 66.00 per share on 2025E estimates.
The main driver of this model is the level of return available to a controlling investor, influenced by the cost of that investors’ capital (opportunity costs) and the purchase price – in this case the enterprise value of the company. Here, the adjusted FCF yield is used as a proxy for the required return and is defined as EBITDA less minority interest, taxes and investments required to maintain existing assets (maintenance capex).
FCF yield in EURm 2021E 2022E 2023E 2024E 2025E
EBITDA 803,9 814,9 830,8 861,9 889,6 - Maintenance capex 243,5 224,3 210,6 201,2 195,9 - Minorities 0,0 0,0 0,0 0,0 0,0 - tax expenses 129,5 138,3 147,5 158,9 168,3 = Adjusted Free Cash Flow 430,9 452,4 472,7 501,8 525,4
Actual Market Cap 13.254 13.254 13.254 13.254 13.254 + Net debt (cash) 1096,8 826,1 561,9 304,7 43,1 + Pension provisions 718,1 756,9 794,8 846,6 888,9 + Off balance sheet financing 0,0 0,0 0,0 0,0 0,0 - Financial assets 240,8 240,8 240,8 240,8 240,8 - Accumulated dividend payments 158,7 328,1 508,9 703,6 909,9 EV Reconciliations 1415,5 1014,1 607,0 206,9 -218,6 = Actual EV' 14.669 14.268 13.861 13.461 13.035
Adjusted Free Cash Flow yield 2,9% 3,2% 3,4% 3,7% 4,0% base hurdle rate 6,0% 6,0% 6,0% 6,0% 6,0% ESG adjustment (score 50/100) 0,0% 0,0% 0,0% 0,0% 0,0% adjusted hurdle rate 6,0% 6,0% 6,0% 6,0% 6,0% Fair EV 7.182 7.540 7.879 8.364 8.756 - EV Reconciliations 1.416 1.014 607 207 -219 Fair Market Cap 5.766 6.526 7.272 8.157 8.975
No. of shares (million) 135,4 135,4 135,4 135,4 135,4 Fair value per share in EUR 42,6 48,2 53,7 60,2 66,3 Premium (-) / discount (+) in % -56,5% -50,8% -45,1% -38,5% -32,3%
Sensitivity analysis fair value
4,0% 69,1 76,0 82,8 91,1 98,6 5,0% 53,2 59,3 65,3 72,6 79,2 Adjusted hurdle 6,0% 42,6 48,2 53,7 60,2 66,3 rate 7,0% 35,0 40,2 45,4 51,4 57,0 8,0% 29,3 34,3 39,2 44,8 50,1 Source: Company data; AlsterResearch
Simply put, the model assumes that investors require companies to generate a minimum return on the investor’s purchase price. The required after-tax return equals the model’s hurdle rate of 6%. Anything less suggests the stock is expensive; anything more suggests the stock is cheap. ESG adjustments might be applicable, based on the overall Leeway ESG Score. A high score indicates high awareness for environmental, social or governance issues and thus might lower the overall risk an investment in the company might carry. A low score on the contrary might increase the risk of an investment and might therefore trigger a higher required hurdle rate.
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Financials in six charts
Source: Company data; AlsterResearch
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Financials
Profit and loss (EUR m) 2018 2019 2020 2021E 2022E 2023E Sales 3,154 3,408 3,520 3,711 3,918 4,148 Sales growth 5.3% 8.0% 3.3% 5.4% 5.6% 5.9% Cost of sales 1,913 2,047 2,130 2,189 2,312 2,447 Gross profit 1,241 1,361 1,390 1,521 1,607 1,701 SG&A expenses 655 733 737 779 823 871 Research and development 200 213 212 230 243 257 Other operating expenses (income) -48 -41 -46 -48 -51 -54 EBITDA 631 685 742 804 816 837 Depreciation 197 230 255 243 224 211 EBITA 434 455 488 560 592 626 Amortisation of goodwill and intangible assets 0 0 0 0 0 0 EBIT 434 455 488 560 592 626 Financial result -45 -46 -64 -55 -51 -45 Recurring pretax income from continuing operations 389 410 424 505 540 581 Extraordinary income/loss 0 0 0 0 0 0 Earnings before taxes 389 410 424 505 540 581 Taxes 109 112 109 129 139 149 Net income from continuing operations 280 298 315 375 402 432 Result from discontinued operations (net of tax) 0 0 0 0 0 0 Net income 280 298 315 375 402 432 Minority interest -0 -3 -4 0 0 0 Net profit (reported) 279 295 311 375 402 432 Average number of shares 129.81 134.80 135.43 135.43 135.43 135.43 EPS reported 2.15 2.19 2.30 2.77 2.97 3.19
Profit and loss (common size) 2018 2019 2020 2021E 2022E 2023E Sales 100% 100% 100% 100% 100% 100% Cost of sales 61% 60% 61% 59% 59% 59% Gross profit 39% 40% 39% 41% 41% 41% SG&A expenses 21% 22% 21% 21% 21% 21% Research and development 6% 6% 6% 6% 6% 6% Other operating expenses (income) -2% -1% -1% -1% -1% -1% EBITDA 20% 20% 21% 22% 21% 20% Depreciation 6% 7% 7% 7% 6% 5% EBITA 14% 13% 14% 15% 15% 15% Amortisation of goodwill and intangible assets 0% 0% 0% 0% 0% 0% EBIT 14% 13% 14% 15% 15% 15% Financial result -1% -1% -2% -1% -1% -1% Recurring pretax income from continuing operations 12% 12% 12% 14% 14% 14% Extraordinary income/loss 0% 0% 0% 0% 0% 0% Earnings before taxes 12% 12% 12% 14% 14% 14% Taxes 3% 3% 3% 3% 4% 4% Net income from continuing operations 9% 9% 9% 10% 10% 10% Result from discontinued operations (net of tax) 0% 0% 0% 0% 0% 0% Net income 9% 9% 9% 10% 10% 10% Minority interest -0% -0% -0% 0% 0% 0% Net profit (reported) 9% 9% 9% 10% 10% 10% Source: Company data; AlsterResearch
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Balance sheet (EUR m) 2018 2019 2020 2021E 2022E 2023E Intangible assets (exl. Goodwill) 706 953 812 826 841 857 Goodwill 1,206 1,435 1,382 1,382 1,382 1,382 Property, plant and equipment 1,036 1,245 1,205 1,110 1,043 998 Financial assets 136 222 241 241 241 241 FIXED ASSETS 3,085 3,854 3,640 3,559 3,506 3,478 Inventories 845 892 863 902 952 1,008 Accounts receivable 596 648 601 633 669 708 Other current assets 26 22 16 16 16 16 Liquid assets 287 458 740 403 474 436 Deferred taxes 0 0 0 0 0 0 Deferred charges and prepaid expenses 81 79 80 84 89 94 CURRENT ASSETS 1,835 2,099 2,300 2,038 2,199 2,262 TOTAL ASSETS 4,920 5,953 5,940 5,597 5,706 5,740 SHAREHOLDERS EQUITY 1,892 2,400 2,302 2,519 2,751 3,000 MINORITY INTEREST 52 57 60 60 60 60 Long-term debt 1,036 1,538 2,041 1,400 1,300 1,000 Provisions for pensions and similar obligations 513 605 681 718 758 803 Other provisions 208 207 199 210 222 235 Non-current liabilities 1,758 2,350 2,921 2,328 2,280 2,037 short-term liabilities to banks 616 519 25 100 0 0 Accounts payable 316 332 334 343 363 384 Advance payments received on orders 25 28 31 32 34 36 Other liabilities (incl. from lease and rental contracts) -39 -42 -34 -36 -38 -40 Deferred taxes 172 167 154 154 154 154 Deferred income 130 142 147 96 102 108 Current liabilities 1,218 1,146 657 691 615 642 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 4,920 5,953 5,940 5,597 5,706 5,740
Balance sheet (common size) 2018 2019 2020 2021E 2022E 2023E Intangible assets (excl. Goodwill) 14% 16% 14% 15% 15% 15% Goodwill 25% 24% 23% 25% 24% 24% Property, plant and equipment 21% 21% 20% 20% 18% 17% Financial assets 3% 4% 4% 4% 4% 4% FIXED ASSETS 63% 65% 61% 64% 61% 61% Inventories 17% 15% 15% 16% 17% 18% Accounts receivable 12% 11% 10% 11% 12% 12% Other current assets 1% 0% 0% 0% 0% 0% Liquid assets 6% 8% 12% 7% 8% 8% Deferred taxes 0% 0% 0% 0% 0% 0% Deferred charges and prepaid expenses 2% 1% 1% 2% 2% 2% CURRENT ASSETS 37% 35% 39% 36% 39% 39% TOTAL ASSETS 100% 100% 100% 100% 100% 100% SHAREHOLDERS EQUITY 38% 40% 39% 45% 48% 52% MINORITY INTEREST 1% 1% 1% 1% 1% 1% Long-term debt 21% 26% 34% 25% 23% 17% Provisions for pensions and similar obligations 10% 10% 11% 13% 13% 14% Other provisions 4% 3% 3% 4% 4% 4% Non-current liabilities 36% 39% 49% 42% 40% 35% short-term liabilities to banks 13% 9% 0% 2% 0% 0% Accounts payable 6% 6% 6% 6% 6% 7% Advance payments received on orders 0% 0% 1% 1% 1% 1% Other liabilities (incl. from lease and rental contracts) -1% -1% -1% -1% -1% -1% Deferred taxes 3% 3% 3% 3% 3% 3% Deferred income 3% 2% 2% 2% 2% 2% Current liabilities 25% 19% 11% 12% 11% 11% TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 100% 100% 100% 100% 100% 100% Source: Company data; AlsterResearch
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Cash flow statement (EUR m) 2018 2019 2020 2021E 2022E 2023E Net profit/loss 280 298 315 375 402 432 Depreciation of fixed assets (incl. leases) 197 230 255 243 224 211 Amortisation of goodwill 0 0 0 0 0 0 Amortisation of intangible assets 0 0 0 0 0 0 Others 153 145 170 48 52 57 Cash flow from operations before changes in w/c 630 673 739 666 678 700 Increase/decrease in inventory -90 -8 -22 -39 -50 -56 Increase/decrease in accounts receivable -44 -12 -7 -32 -35 -39 Increase/decrease in accounts payable 53 -14 43 9 19 21 Increase/decrease in other w/c positions -111 -95 -120 -55 0 1 Increase/decrease in working capital -191 -129 -106 -117 -66 -73 Cash flow from operating activities 439 544 633 550 612 627 CAPEX -228 -174 -144 -163 -172 -182 Payments for acquisitions -22 -763 -3 0 0 0 Financial investments -2 -3 -5 0 0 0 Income from asset disposals 6 58 3 0 0 0 Cash flow from investing activities -246 -882 -150 -163 -172 -182 Cash flow before financing 193 -338 483 387 440 445 Increase/decrease in debt position 16 262 -15 -566 -200 -300 Purchase of own shares 0 0 0 0 0 0 Capital measures 0 400 0 0 0 0 Dividends paid -117 -122 -129 -159 -170 -183 Others -51 -43 -45 0 0 0 Effects of exchange rate changes on cash 3 7 -15 0 0 0 Cash flow from financing activities -149 505 -204 -724 -370 -483 Increase/decrease in liquid assets 44 166 279 -337 70 -37 Liquid assets at end of period 280 446 725 388 458 421 Source: Company data; AlsterResearch
Regional sales split (EURm) 2018 2019 2020 2021E 2022E 2023E Domestic 0 0 0 0 0 0 Europe (ex domestic) 1,379 1,431 1,392 1,430 1,471 1,557 The Americas 1,094 1,219 1,379 1,454 1,535 1,625 Asia 682 758 750 828 913 967 Rest of World 0 0 0 0 0 0 Total sales 3,154 3,408 3,520 3,711 3,918 4,148
Regional sales split (common size) 2018 2019 2020 2021E 2022E 2023E Domestic 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Europe (ex domestic) 43.7% 42.0% 39.5% 38.5% 37.5% 37.5% The Americas 34.7% 35.8% 39.2% 39.2% 39.2% 39.2% Asia 21.6% 22.2% 21.3% 22.3% 23.3% 23.3% Rest of World 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Total sales 100% 100% 100% 100% 100% 100% Source: Company data; AlsterResearch
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Ratios 2018 2019 2020 2021E 2022E 2023E Per share data Earnings per share reported 2.15 2.19 2.30 2.77 2.97 3.19 Cash flow per share 1.86 2.33 2.79 2.26 2.86 3.08 Book value per share 14.57 17.80 17.00 18.60 20.31 22.15 Dividend per share 0.90 0.90 0.95 1.17 1.25 1.35 Valuation P/E 46.2x 45.4x 43.3x 35.9x 33.5x 31.1x P/CF 53.3x 42.7x 35.6x 44.0x 34.7x 32.3x P/BV 6.8x 5.6x 5.8x 5.3x 4.9x 4.5x Dividend yield (%) 0.9% 0.9% 1.0% 1.2% 1.3% 1.4% FCF yield (%) 1.9% 2.3% 2.8% 2.3% 2.9% 3.1% EV/Sales 4.9x 4.6x 4.4x 4.1x 3.8x 3.6x EV/EBITDA 24.3x 22.9x 20.8x 19.0x 18.4x 17.7x EV/EBIT 35.3x 34.4x 31.7x 27.3x 25.4x 23.7x Income statement (EURm) Sales 3,154 3,408 3,520 3,711 3,918 4,148 yoy chg in % 5.3% 8.0% 3.3% 5.4% 5.6% 5.9% Gross profit 1,241 1,361 1,390 1,521 1,607 1,701 Gross margin in % 39.4% 39.9% 39.5% 41.0% 41.0% 41.0% EBITDA 631 685 742 804 816 837 EBITDA margin in % 20.0% 20.1% 21.1% 21.7% 20.8% 20.2% EBIT 434 455 488 560 592 626 EBIT margin in % 13.8% 13.4% 13.8% 15.1% 15.1% 15.1% Net profit 279 295 311 375 402 432 Cash flow statement (EURm) CF from operations 439 544 633 550 612 627 Capex -228 -174 -144 -163 -172 -182 Maintenance Capex 197 230 255 243 224 211 Free cash flow 210 369 489 387 440 445 Balance sheet (EURm) Intangible assets 1,912 2,388 2,194 2,208 2,223 2,239 Tangible assets 1,036 1,245 1,205 1,110 1,043 998 Shareholders' equity 1,892 2,400 2,302 2,519 2,751 3,000 Pension provisions 513 605 681 718 758 803 Liabilities and provisions 2,374 2,868 2,946 2,428 2,280 2,037 Net financial debt 1,365 1,599 1,325 1,097 826 564 w/c requirements 1,101 1,179 1,099 1,159 1,224 1,296 Ratios ROE 14.8% 12.4% 13.7% 14.9% 14.6% 14.4% ROCE 10.2% 8.6% 9.3% 11.3% 11.8% 12.4% Net gearing 72.1% 66.6% 57.6% 43.5% 30.0% 18.8% Net debt / EBITDA 2.2x 2.3x 1.8x 1.4x 1.0x 0.7x Source: Company data; AlsterResearch
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Conflict of interests
Disclosures regarding research publications of SRH AlsterResearch AG pursuant to section 85 of the German Securities Trading Act (WpHG) and distributed in the UK under an EEA branch passport, subject to the FCA requirements on research recommendation disclosures It is essential that any research recommendation is fairly presented and discloses interests of indicates relevant conflicts of interest. Pursuant to section 85 of the German Securities Trading Act (WpHG) a research report has to point out possible conflicts of interest in connection with the analyzed company. Further to this, under the FCA’s rules on research recommendations, any conflicts of interest in connection with the recommendation must be disclosed. A conflict of interest is presumed to exist in particular if SRH AlsterResearch AG
(1) or its affiliate(s) (either in its own right or as part of a consortium) within the past twelve months, acquired the financial instruments of the analyzed company,
(2) has entered into an agreement on the production of the research report with the analyzed company,
(3) or its affiliate(s) has, within the past twelve months, been party to an agreement on the provision of investment banking services with the analyzed company or have received services or a promise of services under the term of such an agreement,
(4) or its affiliate(s) holds a) 5% or more of the share capital of the analyzed company, or b) the analyzed company holds 5% or more of the share capital of SRH AlsterResearch AG or its affiliate(s),
(5) or its affiliate(s) holds a net long (a) or a net short (b) position of 0.5% of the outstanding share capital of the analyzed company or derivatives thereof,
(6) or its affiliate(s) is a market maker or liquidity provider in the financial instruments of the issuer,
(7) or the analyst has any other significant financial interests relating to the analyzed company such as, for example, exercising mandates in the interest of the analyzed company or a significant conflict of interest with respect to the issuer,
(8) The research report has been made available to the company prior to its publication. Thereafter, only factual changes have been made to the report.
Conflicts of interest that existed at the time when this research report was published:
Company Disclosure Symrise AG
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Important disclosures
1. General Information/Liabilities This research report has been produced for the The decision on the choice of the financial instruments analyzed in this document information purposes of institutional investors only, and is not in any way a was solely made by SRH AlsterResearch AG. The opinions and estimates in this personal recommendation, offer or solicitation to buy or sell the financial research report are subject to change without notice. It is within the discretion of instruments mentioned herein. The document is confidential and is made SRH AlsterResearch AG whether and when it publishes an update to this research available by SRH AlsterResearch AG, exclusively to selected recipients [in DE, GB, report, but in general updates are created on a regular basis, after 6 months at FR, CH, US, UK, Scandinavia, and Benelux or, in individual cases, also in other the latest. A sensitivity analysis is included and published in company’s initial countries]. 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Liability for damages • This is particularly true in respect of investments in companies which are arising either directly or as a consequence of the use of information, opinions and not established and/or small and have no established business or estimates is also excluded. Past performance of a financial instrument is not corporate assets. necessarily indicative of future performance. • Share prices may fluctuate significantly. This is particularly true for shares with low liquidity (market breadth). Even small orders can have a significant 2. Responsibilities This research report was prepared by the research analyst impact on the share price. named on the front page (the ʺProducerʺ). The Producer is solely responsible for • In the case of shares in narrow markets, it may also happen that there is no the views and estimates expressed in this report. The report has been prepared or very little actual trading there and that published prices are not based on independently. The content of the research report was not influenced by the actual trading but have only been provided by a stockbroker. issuer of the analyzed financial instrument at any time. It may be possible that • In such markets a shareholder cannot expect to find a buyer for his shares parts of the research report were handed out to the issuer for information at all and/or at reasonable prices. In such narrow markets there is a very purposes prior to the publication without any major amendments high possibility of manipulating prices and in such markets there are often being made thereafter. considerable price fluctuations. • An investment in shares with low liquidity and low market capitalization is 3. 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In case a research analyst or a closely this report is based on publicly available sources (such as, for example, related person is confronted with a conflict of interest, the research analyst is Bloomberg, Reuters, VWD-Trader and the relevant daily press) believed to be restricted from covering this company. reliable. SRH AlsterResearch AG has checked the information for plausibility but not for accuracy or completeness. 4. Information Concerning the Methods of Valuation/Update The determination of the fair value per share, i.e. the price target, and the resultant rating is done on 8. Competent Supervisory Authority SRH AlsterResearch AG are under the basis of the adjusted free cash flow (adj. FCF) method and on the basis of supervision of the BaFin – German Federal Financial Supervisory Authority the discounted cash flow – DCF model. Furthermore, a peer group comparison is (Bundesanstalt für Finanzdienstleistungsaufsicht), Graurheindorfer Straße 108, made. The adj. FCF method is based on the assumption that investors purchase 53117 Bonn and Marie-Curie-Straße 24 – 28, 60439 Frankfurt a.M. This assets only at a price (enterprise value) at which the operating cash flow return document is distributed in the UK under a MiFID EEA branch passport and in after taxes on this investment exceeds their opportunity costs in the form of a compliance with the applicable FCA requirements. hurdle rate of 7.5%. The operating cash flow is calculated as EBITDA less maintenance capex and taxes. Within the framework of the DCF approach, the 9. Specific Comments for Recipients Outside of Germany This research report future free cash flows are calculated initially on the basis of a fictitious capital is subject to the law of the Federal Republic of Germany. The distribution of this structure of 100% equity, i.e. interest and repayments on debt capital are not information to other states in particular to the USA, Canada, Australia and Japan factored in initially. The adjustment towards the actual capital structure is done may be restricted or prohibited by the laws applicable within this state. by discounting the calculated free cash flows with the weighted average cost of capital (WACC), which takes into account both the cost of equity capital and the 10. Miscellaneous According to Article 4(1) No. i of the delegated regulation cost of debt. After discounting, the calculated total enterprise value is reduced by 2016/958 supplementing regulation 596/2014 of the European Parliament, the interest-bearing debt capital in order to arrive at the equity value. Detailed further information regarding investment recommendations of the last 12 information on the valuation principles and methods used and the underlying months are published free of charge under https://www.alsterresearch.com. assumptions can be found at https://www.alsterresearch.com.
SRH AlsterResearch AG uses the following three-step rating system for the analyzed companies:
• Buy: Sustainable upside potential of more than 10% within 12 months
• Sell: Sustainable downside potential of more than 10% within 12 months.
• Hold: Upside/downside potential is limited. No immediate catalyst visible.
NB: The ratings of SRH AlsterResearch AG are not based on a performance that is expected to be “relative“ to the market.
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