Sebastien Lemonnier of INOCAP Gestion presented his investment theses on Rheinmetall (Germany: RHM) and Verallia (France: VRLA) at European Investing Summit 2022.
Thesis summaries:
Rheinmetall, founded in 1889, is a leading international systems provider of defense technology and a renowned supplier to the global automotive industry. Sebastien believes that the business is moving from low growth and a cyclical top line to sustainably higher growth and accelerating FCF. This is driven by the impact of Russia’s war of conquest in Ukraine on the future military posture of other countries in Europe. Germany has vowed to spend at least 2% of GDP on defense and is establishing a €100 billion defense fund. Sebastien also believes the market is overlooking key drivers of operating leverage in the business model. Based on estimated average EBIT from 2022-2025, the enterprise recently traded at an EV/EBIT multiple of ~8x.
Verallia, founded in 1827, is a leading producer of glass packaging for beverage products. The stock has been overlooked since the IPO, trading ~15% below the IPO price nearly three years later. The market perceives Verallia as lower-quality than its Spanish peer, Vidrala, even though Virallia has higher ROCE. The company is by nature a relatively defensive, resilient business (small-ticket items). It is a critical supplier to the food and beverage industry in an oligopolistic market, with the top four players having a combined market share of 65-70%. Verallia recently traded at a ~10% FCF yield, despite a resilient EBIT margin of ~16% and ROCE in excess of 20%.
Listen to this session:
slide presentation audio recording
About the instructor:
Sebastien Lemonnier started his carreer in 2003 as financial analyst at Tocqueville Finance. He was promoted as european fund manager in 2006 running the UCIT fund Tocqueville Value Europe being rated AA by Citywire before he pursued his carreer for Mansartis, a Paris based multi family-office in 2012. He joined INOCAP Gestion in 2017, managing the UCIT fund Quadrige Europe Midcaps that has been outperforming his peers on a 3 years basis being up by 26,6% versus 14,6% as of Sept 1 2022, (source Quantalys). Sebastien holds a Masters Degree in Financial Management from Panthéon-Sorbonne Paris. He is married and got one daughter born last November 2020. As a hobby, he practices English boxing and still plays tennis that he was used to play in competition when teenager and is currently supporting with a President responsability the French tennis academy CDHN that train of the best French young tennis players.
About The Author: MOI Global Editorial Team
The MOI Global Editorial Team, led by John Mihaljevic, CFA, includes community builders, event organizers, writers, editors, research associates, security analysts, and fanatical member support advocates. Our sole purpose is to serve the members of MOI Global as well as we possibly can in order to help them learn, invest intelligently, and build lifelong friendships with like-minded people.
Who is MOI Global? In recent years, The Manual of Ideas has expanded to become more than simply “the very best investing newsletter on the planet” (Mohnish Pabrai). We are now a thriving global community of intelligent investors, connected through great ideas, thought-provoking interviews, online conferences, live member events, and much more.
Members of MOI Global enjoy complimentary access to a growing array of resources and content related to the art of intelligent investing. Members also enjoy preferential access to selected offline events as well as exclusive access to other events hosted by MOI Global, including the Zurich Project Summit, the Latticework Conference, and Ideaweek.
More posts by MOI Global Editorial Team