My Market Wizard

Ferrari N.V. 20-F Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Ferrari N.V.

Filing date:

02/21/2025

TLDR:

Ferrari N.V. demonstrates strong financial performance with increased revenues and profitability. However, risks related to electric vehicles and regulations require monitoring.

ELI5:

Ferrari is doing well selling fancy cars, but they need to watch out for new rules and the shift to electric cars.

Accession #:

0001648416-25-000027

Published on

Analyst Summary

  • Revenue, EBIT, EBITDA, and Net Profit all show positive growth trends.
  • Shipment volume growth is moderate, reflecting the low-volume strategy.
  • Hybrid-Engine Car Shipment Percentage crossed over 50%, indicating a significant shift.
  • Gross Profit Margin: 50.1%, a 0.6% increase from 2023.
  • Operating Profit Margin: 28.3%, a 4.4% increase from 2023.
  • Net Profit Margin: 22.9%, an 8.5% increase from 2023.
  • Return on Assets (ROA): 16.1%.
  • Return on Equity (ROE): 43.1%.
  • Basic EPS: 8.47 EUR, a 22.6% increase from 2023.
  • Diluted EPS: 8.46 EUR, a 22.6% increase from 2023.
  • Current Ratio: 2.2, a 10.6% increase from 2023.
  • Quick Ratio: 1.7, an 11.8% increase from 2023.
  • Cash Ratio: 0.77, a 37.5% increase from 2023.
  • Debt-to-Equity Ratio: 0.95, a 17.3% increase from 2023.
  • Debt-to-Assets Ratio: 0.35, a 12.9% increase from 2023.
  • Interest Coverage Ratio: 12.9, a 17.3% increase from 2023.
  • Asset Turnover: 0.70, a -5.4% decrease from 2023.
  • Inventory Turnover: 3.3, a -2.9% decrease from 2023.
  • Days Sales Outstanding (DSO): 19.1 days, a 19.4% increase from 2023.
  • Days Payable Outstanding (DPO): 103.6 days, a -8.6% decrease from 2023.
  • Price-to-Earnings Ratio (P/E): 55.0.
  • Price-to-Book Ratio (P/B): 27.6.
  • Price-to-Sales Ratio (P/S): 14.6.
  • Enterprise Value to EBITDA (EV/EBITDA): 40.2.
  • Revenue Growth: 11.8%.
  • Net Income Growth: 21.4%.
  • EPS Growth: 22.6%.
  • Free cash flow increased from €848 million in 2023 to €938 million in 2024, a 10.6% increase.

Opportunities and Risks

  • Brand Dilution: The expansion into lifestyle products and the introduction of electric vehicles could potentially dilute the brand’s exclusivity if not managed carefully.
  • Technological Disruption: The rapid pace of technological change in the automotive industry, particularly the shift to electric vehicles, poses a risk if Ferrari cannot keep up with competitors or if client preferences shift away from traditional combustion engines.
  • Regulatory Pressures: Increasingly stringent emissions and safety regulations could increase costs and limit the types of cars Ferrari can sell.
  • Supply Chain Disruptions: Reliance on single-source suppliers and potential disruptions due to geopolitical events or natural disasters could impact production.
  • Economic Downturn: Demand for luxury goods is sensitive to economic conditions. A global recession or downturn in key markets could negatively affect sales.
  • Cybersecurity: Increasing digitization of car systems and the demand for connected cars increases the cyber security risk.
  • Brand Strength: Ferrari’s strong brand and loyal customer base provide a solid foundation for growth.
  • Product Innovation: The introduction of new models, including hybrid and electric vehicles, can attract new customers and drive sales.
  • Geographic Expansion: Growth in emerging markets, particularly in Asia, offers significant potential.
  • Lifestyle Brand Extension: Expanding into carefully selected luxury and lifestyle categories can broaden the customer base and increase brand relevance.

Potential Implications

Stock Price

  • Monitor Electric Vehicle Strategy: Closely track the market acceptance and profitability of Ferrari’s electric vehicle offerings.
  • Manage Regulatory Compliance: Proactively adapt to evolving regulations and explore strategies to mitigate compliance costs.
  • Maintain Brand Exclusivity: Carefully balance production volume with brand exclusivity to preserve pricing power and customer demand.

Ferrari N.V. (RACE) – 20-F Filing Analysis (Year Ended December 31, 2024)

Executive Summary

This report analyzes Ferrari N.V.’s 20-F filing for the year ended December 31, 2024. Ferrari continues to demonstrate strong brand power and financial performance, with increased revenues and profitability. However, several risks, particularly related to the automotive industry’s transition to electric vehicles and evolving regulations, warrant careful monitoring. Overall, a Hold rating is suggested, pending further clarity on the company’s long-term strategy in the face of these challenges.

Company Overview

Ferrari N.V. is a leading luxury performance sports car manufacturer. The company designs, engineers, produces, and sells luxury cars, participates in Formula 1 racing, and engages in lifestyle brand activities. Key markets include EMEA, the Americas, and APAC. The company is navigating a changing automotive landscape, including increasing regulatory pressures and the shift towards hybrid and electric vehicles.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management emphasizes brand exclusivity, innovation, and sustainability. They highlight the low-volume production strategy and focus on rewarding loyal clients. The narrative acknowledges the challenges of integrating electric technology and meeting increasingly stringent regulations. The tone is generally optimistic, but with clear recognition of existing and emerging risks.

Financial Statement Analysis

Key Ratios and Trends

Metric 2024 2023 2022 Trend
Net Revenues (€ million) 6,677 5,970 5,095 Increasing
Operating Profit (EBIT) (€ million) 1,888 1,617 1,227 Increasing
Net Profit (€ million) 1,526 1,257 939 Increasing
EBITDA (€ million) 2,555 2,279 1,773 Increasing
Shipments (Units) 13,752 13,663 13,221 Increasing

Key Observations: Revenue, EBIT, EBITDA, and Net Profit all show positive growth trends. Shipment volume growth is more moderate, reflecting the low-volume strategy. The increasing proportion of hybrid cars in shipments is notable.

Uncommon Metrics

  • Percentage of New Cars Sold to Existing Clients: 81% (Indicates strong brand loyalty)
  • Percentage of New Cars Sold to Multi-Ferrari Owners: 48% (Highlights the importance of the collector community)
  • Hybrid-Engine Car Shipment Percentage: 51.3% (Crossing over 50% for the first time, indicating a significant shift)

Financial Statement Footnotes

The footnotes provide crucial details on accounting policies, debt structure, and related party transactions. The discussion of the Patent Box tax regime is important for understanding the company’s tax strategy. The details on the asset-backed financing (securitization) program provide insight into the funding of financial services activities.

Risk and Opportunity Assessment

Risks

  • Brand Dilution: The expansion into lifestyle products and the introduction of electric vehicles could potentially dilute the brand’s exclusivity if not managed carefully.
  • Technological Disruption: The rapid pace of technological change in the automotive industry, particularly the shift to electric vehicles, poses a risk if Ferrari cannot keep up with competitors or if client preferences shift away from traditional combustion engines.
  • Regulatory Pressures: Increasingly stringent emissions and safety regulations could increase costs and limit the types of cars Ferrari can sell.
  • Supply Chain Disruptions: Reliance on single-source suppliers and potential disruptions due to geopolitical events or natural disasters could impact production.
  • Economic Downturn: Demand for luxury goods is sensitive to economic conditions. A global recession or downturn in key markets could negatively affect sales.
  • Cybersecurity: Increasing digitization of car systems and the demand for connected cars increases the cyber security risk.

Opportunities

  • Brand Strength: Ferrari’s strong brand and loyal customer base provide a solid foundation for growth.
  • Product Innovation: The introduction of new models, including hybrid and electric vehicles, can attract new customers and drive sales.
  • Geographic Expansion: Growth in emerging markets, particularly in Asia, offers significant potential.
  • Lifestyle Brand Extension: Expanding into carefully selected luxury and lifestyle categories can broaden the customer base and increase brand relevance.

Conclusion and Actionable Insights

Ferrari’s financial performance remains strong, driven by its iconic brand and successful execution of its low-volume strategy. However, the company faces significant challenges in navigating the evolving automotive landscape. The transition to electric vehicles, increasing regulatory pressures, and potential economic downturns pose risks that need to be carefully managed.

Recommendations:

  • Monitor Electric Vehicle Strategy: Closely track the market acceptance and profitability of Ferrari’s electric vehicle offerings.
  • Manage Regulatory Compliance: Proactively adapt to evolving regulations and explore strategies to mitigate compliance costs.
  • Diversify Supply Chain: Reduce reliance on single-source suppliers and build a more resilient supply chain.
  • Maintain Brand Exclusivity: Carefully balance production volume with brand exclusivity to preserve pricing power and customer demand.

Ferrari N.V. Financial Analysis – Year Ended December 31, 2024

1. Financial Ratio and Metric Analysis:

Profitability:

  • Gross Profit Margin:

    • Ratio/Metric: (Net Revenues – Cost of Sales) / Net Revenues = (6,677 – 3,330) / 6,677 = 50.1%
    • Trend: 2023: (5,970 – 2,996) / 5,970 = 49.8%. Percentage Change: (50.1 – 49.8) / 49.8 = 0.6% increase.
    • Industry: The luxury goods industry generally has high gross profit margins, often exceeding 50%. Ferrari’s margin is in line with this.
  • Operating Profit Margin:

    • Ratio/Metric: Operating Profit (EBIT) / Net Revenues = 1,888 / 6,677 = 28.3%
    • Trend: 2023: 1,617 / 5,970 = 27.1%. Percentage Change: (28.3 – 27.1) / 27.1 = 4.4% increase.
    • Industry: A strong operating margin, indicating efficient operations and brand strength. Luxury auto manufacturers typically have operating margins in the 15-30% range.
  • Net Profit Margin:

    • Ratio/Metric: Net Profit / Net Revenues = 1,526 / 6,677 = 22.9%
    • Trend: 2023: 1,257 / 5,970 = 21.1%. Percentage Change: (22.9 – 21.1) / 21.1 = 8.5% increase.
    • Industry: A healthy net profit margin, reflecting good cost control and profitability.
  • Return on Assets (ROA):

    • Ratio/Metric: Net Profit / Total Assets = 1,526 / 9,497 = 16.1%
    • Industry: A good ROA suggests effective asset utilization.
  • Return on Equity (ROE):

    • Ratio/Metric: Net Profit / Total Equity = 1,526 / 3,543 = 43.1%
    • Industry: A high ROE indicates efficient use of shareholder investment.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Ratio/Metric: Basic EPS = 8.47 EUR, Diluted EPS = 8.46 EUR
    • Trend: 2023: Basic EPS = 6.91 EUR, Diluted EPS = 6.90 EUR. Percentage Change: Basic EPS = (8.47 – 6.91) / 6.91 = 22.6% increase, Diluted EPS = (8.46 – 6.90) / 6.90 = 22.6% increase.
    • Industry: EPS growth is a key indicator of profitability and shareholder value.

Liquidity:

  • Current Ratio:

    • Ratio/Metric: Total Current Assets / Total Current Liabilities = 5,019.9 / (945.7 + 37.9 + 1106.2) = 2.2
    • Trend: 2023: 3,986 / (930.6 + 89.3 + 1023) = 1.99. Percentage Change: (2.2 – 1.99) / 1.99 = 10.6% increase.
    • Industry: A current ratio above 1 indicates good short-term liquidity.
  • Quick Ratio (Acid-Test Ratio):

    • Ratio/Metric: (Total Current Assets – Inventories) / Total Current Liabilities = (5,019.9 – 1,088.2) / (945.7 + 37.9 + 1106.2) = 1.7
    • Trend: 2023: (3,986 – 948.5) / (930.6 + 89.3 + 1023) = 1.52. Percentage Change: (1.7 – 1.52) / 1.52 = 11.8% increase.
    • Industry: A quick ratio above 1 is generally considered healthy.
  • Cash Ratio:

    • Ratio/Metric: Cash and Cash Equivalents / Total Current Liabilities = 1,742.2 / (945.7 + 37.9 + 1106.2) = 0.77
    • Trend: 2023: 1,122 / (930.6 + 89.3 + 1023) = 0.56. Percentage Change: (0.77 – 0.56) / 0.56 = 37.5% increase.
    • Industry: This ratio indicates the extent to which current liabilities can be covered by immediate cash.

Solvency/Leverage:

  • Debt-to-Equity Ratio:

    • Ratio/Metric: Total Debt / Total Equity = 3,352 / 3,543 = 0.95
    • Trend: 2023: 2,477 / 3,071 = 0.81. Percentage Change: (0.95 – 0.81) / 0.81 = 17.3% increase.
    • Industry: This ratio indicates the proportion of debt and equity used to finance the company’s assets.
  • Debt-to-Assets Ratio:

    • Ratio/Metric: Total Debt / Total Assets = 3,352 / 9,497 = 0.35
    • Trend: 2023: 2,477 / 8,051 = 0.31. Percentage Change: (0.35 – 0.31) / 0.31 = 12.9% increase.
    • Industry: This ratio measures the proportion of a company’s assets that are financed by debt.
  • Interest Coverage Ratio (Times Interest Earned):

    • Ratio/Metric: EBIT / Financial Expenses = 1,888 / 145.9 = 12.9
    • Trend: 2023: 1,617 / 147.3 = 11.0. Percentage Change: (12.9 – 11.0) / 11.0 = 17.3% increase.
    • Industry: A high ratio indicates the company’s ability to cover its interest expenses.

Activity/Efficiency:

  • Asset Turnover:

    • Ratio/Metric: Net Revenues / Total Assets = 6,677 / 9,497 = 0.70
    • Trend: 2023: 5,970 / 8,051 = 0.74. Percentage Change: (0.70 – 0.74) / 0.74 = -5.4% decrease.
    • Industry: This ratio measures how efficiently a company uses its assets to generate sales.
  • Inventory Turnover:

    • Ratio/Metric: Cost of Sales / Average Inventory = 3,330 / ((1,088.2 + 948.5)/2) = 3.3
    • Trend: 2023: 2,996 / ((948.5 + 812.7)/2) = 3.4. Percentage Change: (3.3 – 3.4) / 3.4 = -2.9% decrease.
    • Industry: This ratio measures how quickly a company sells its inventory.
  • Days Sales Outstanding (DSO):

    • Ratio/Metric: (Accounts Receivable / Revenue) * 365 = (349.2 / 6,677) * 365 = 19.1 days
    • Trend: 2023: (261.4 / 5,970) * 365 = 16.0 days. Percentage Change: (19.1 – 16.0) / 16.0 = 19.4% increase.
    • Industry: This ratio measures the average number of days that a company takes to collect revenue after a sale.
  • Days Payable Outstanding (DPO):

    • Ratio/Metric: (Accounts Payable / Cost of Sales) * 365 = (945.7 / 3,330) * 365 = 103.6 days
    • Trend: 2023: (930.6 / 2,996) * 365 = 113.4 days. Percentage Change: (103.6 – 113.4) / 113.4 = -8.6% decrease.
    • Industry: This ratio measures the average number of days that a company takes to pay its suppliers.

Valuation:

  • Price-to-Earnings Ratio (P/E):

    • Ratio/Metric: Stock Price / EPS = 503.43 USD / 8.46 EUR = 503.43 / (8.46 * 1.0824) = 55.0
    • Industry: The P/E ratio is a valuation metric that compares a company’s stock price to its earnings per share.
  • Price-to-Book Ratio (P/B):

    • Ratio/Metric: Market Cap / Book Value of Equity = (179.044 * 503.43 * 1.0824) / 3,543,238 = 27.6
    • Industry: This ratio compares a company’s market capitalization to its book value of equity.
  • Price-to-Sales Ratio (P/S):

    • Ratio/Metric: Market Cap / Net Revenues = (179.044 * 503.43 * 1.0824) / 6,676,668 = 14.6
    • Industry: This ratio compares a company’s market capitalization to its net revenues.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Ratio/Metric: (Market Cap + Total Debt – Cash) / EBITDA = ((179.044 * 503.43 * 1.0824) + 3,352,000 – 1,742,000) / 2,555,000 = 40.2
    • Industry: This ratio compares a company’s enterprise value to its earnings before interest, taxes, depreciation, and amortization.

Growth Rates:

  • Revenue Growth:

    • Ratio/Metric: (Current Revenue – Previous Revenue) / Previous Revenue = (6,677 – 5,970) / 5,970 = 11.8%
  • Net Income Growth:

    • Ratio/Metric: (Current Net Income – Previous Net Income) / Previous Net Income = (1,526 – 1,257) / 1,257 = 21.4%
  • EPS Growth:

    • Ratio/Metric: (Current EPS – Previous EPS) / Previous EPS = (8.47 – 6.91) / 6.91 = 22.6%

Other Relevant Metrics:

  • Adjusted EBITDA:

    • Analysis: The company presents EBITDA and Adjusted EBITDA, which are non-GAAP measures. In this case, there are no adjustments, so EBITDA equals Adjusted EBITDA. EBITDA is used to assess operating performance.
    • Trend: EBITDA increased from €2,279 million in 2023 to €2,555 million in 2024, a 12.1% increase.
    • Significance: EBITDA provides a view of earnings before the impact of financing and accounting decisions.
  • Free Cash Flow:

    • Analysis: Free cash flow is calculated as cash flow from operating activities less investments in property, plant, and equipment and intangible assets and joint ventures.
    • Trend: Free cash flow increased from €848 million in 2023 to €938 million in 2024, a 10.6% increase.
    • Significance: Free cash flow is a measure of the cash a company generates that is available for discretionary purposes.

2. Commentary:

Ferrari demonstrated strong financial performance in 2024, marked by increased profitability, revenue growth, and efficient capital management. The company’s gross, operating, and net profit margins all improved, indicating enhanced operational efficiency and brand strength. Revenue growth was driven by increased car shipments and strong performance in sponsorship and commercial activities. While leverage ratios increased slightly, the company maintains a healthy interest coverage ratio, suggesting a manageable debt burden. Overall, Ferrari’s financial position remains robust, supported by its iconic brand and effective management strategies.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️