Chargeurs

The cut to our target price reflects the more challenging outlook brought by the COVID-19 outbreak, which is nonetheless mitigated by the quick-witted initiatives taken by management, such as the launch of a new business line focused on the development and production of personal protective equipment, as well as the continued acquired growth strategy.

The lower FY19 EPS reflect the costs related to the ambitious acquired growth strategy pursued by Chargeurs. These non-recurring expenses weigh on the bottom line but underline the group's commitment to reach €1bn in consolidated revenues. On the EBIT front, the FY19 numbers reflect the challenging operating context, particularly for the Protective Films division, as well as the increased investments in the PCC Fashion Technologies division related to the new production facility that came online in H2.

We have cut our FY20 EPS on the back of the sizeable impact that the COVID-19 pandemic is expected to have on Chargeurs' activities. We forecast a 15% sales cut from the 2019 levels, to be partly off-set by the launch of the PPE business under the 'Lainière Santé' banner, in addition to €15m in additional revenues from the continued acquired growth strategy.

Our estimated NAV remains quite conservative, as it assigns no value to the future acquired businesses while factoring in a (partial) purchase cost. The NAV is mainly affected due to the changes in the valuation of the different divisions, after taking into account the FY19 results and our FY20 outlook. We maintain our EV-multiple assumptions but lower our EBIT and EBITDA expectations, accounting for the COVID-19 impact.

We maintain our base assumption which allows for a €100m capital increase, as well as our out-year sales and EBITDA growth rates. The cut to our DCF stems from: 1/ the decreased earnings expected in FY2020 due to the impact from the COVID-19 pandemic, in addition to our slightly more cautious scenario for FY2021, and 2/ the increased number of shares for the capital increase (from 4m to 5m) due to a lower expected issue price.