Original-Research: Ernst Russ AG (von Quirin Privatbank Kapitalmarktgeschäft)
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Original-Research: Ernst Russ AG - from Quirin Privatbank Kapitalmarktgeschäft
Classification of Quirin Privatbank Kapitalmarktgeschäft to Ernst Russ AG
Solid performance in volatile shipping markets - High value of shipping fleet Ernst Russ AG reported solid results for Q1/25. The company’s revenues decreased by around 13% yoy. to EUR 40.9m. Mainly caused by the reduced ship portfolio and higher docking days. The collision in the North Sea involving ER’s vessel Solong, in which ER holds a 55% stake, and the sale of two vessels have reduced the current fleet to 26 ships. Q1/25 EBIT reached EUR 40.3m. Nevertheless adj. by book gains due to the sale of one vessel EBIT of EUR 13.2m was achieved. Adj. EBIT margin of 32.3% declined, remains on a high level and might improve in the further course of the FY. Market charter rates are holding up quite well in volatile especially shipping markets. Charter rates are continuously supported by the blocked sea ways in the red sea which still require additional capacities. ER Charter rates decreased by USD 1,256 per day to USD 16,883 yoy, thus continuing to normalize. ER fixed 9 new contracts in Q1/25 with an average lifetime of 15.4 months at an average level of > USD 18.000 above the current fleet level. Thanks to long-term charter contracts (average duration of 19.8 months as of 31.05.2025) and the high technical availability of the fleet, sales might reach EUR 157m in total FY 25; EBIT is expected to rise to EUR 91m (+28% yoy), primarily driven by gains from the ship sales, while operating EBIT is projected to reach a level of around EUR 58m. Due to investments to reduce non-strategic minority interest we expect bottom line profits to increase at a faster pace in upcoming periods and reduce the complexity of the ER group. Given the ongoing strong balance sheet with an equity ratio of 80.4% (Q1/25) and a rising net cash position of largely above 100m, ER trades not only on historical low multiples but also significantly below the level of international peers. The low valuation is backed by our QPB discounted cash flow model and an ER market value of the shipping portfolio (EUR 319m; EUR 9.46 per share). Therefore, we reiterate our Buy rating and the TP of EUR 10.00. You can download the research here: http://www.more-ir.de/d/32808.pdf For additional information visit our website: https://research.quirinprivatbank.de/ Contact for questions: Quirin Privatbank AG Institutionelles Research Schillerstraße 20 60313 Frankfurt am Main research@quirinprivatbank.de https://research.quirinprivatbank.de/
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