SECO SpA (IOT IM)

European Mid-Cap – Technology Hardware

On a growth path; a few bumps on the way

● This week SECO reported its first set of full-year results as a listed entity. 24 March 2022
The results confirm that the company is accelerating on its growth path,
with a strong order backlog and a supportive pipeline for CLEA. On a more
subdued note, we flag the light delivery on EBIT, higher capex requirements,
and cash generation being affected by increased inventory. Nevertheless, we
BUY
believe that the equity story remains intact and that the business model has Current price Price target
proved its resilience in a difficult operating environment.
EUR6.46 EUR 10.00
● Solid revenue and EBITDA performance; lighter EBIT: While revenue and
24/03/2022 Milan Close
adjusted EBITDA were ahead of our estimates (+3% and +2% respectively),
adjusted EBIT was 10% below our forecast, due to higher-than-expected Market cap (EUR m) 716
D&A. Total adjustments amounted to EUR7.2m, which includes cEUR0.7m Reuters IOT.MI
of exchange gains and cEUR6.5m of non-recurring items related to stock Bloomberg IOT IM
options and M&A transaction fees. Reported net financial debt was 16%
higher than our estimates, although this is related to the fact that the Changes made in this note
company increased its inventory levels this year because of the electronic Rating: Buy (no change)
components shortage. Price target: EUR 10.00 (11.00)
● Key takeaways: 1) The acceleration in the distribution of CLEA is proceeding Estimates changes
ahead of our expectations, with a pipeline of 500k units installed between 2021 2022E 2023E
2022 and 2023; 2) the order backlog of EUR157m, which doubled on a lfl old ∆ % old ∆ % old ∆ %
Sales 113 2.9 187 1.4 226 1.6
basis versus 2020, provides increased visibility on the top line; 3) while the EBIT 19 -9.5 33 -7.5 43 -11.5
shortage has been affecting performance in the first months of the year, we EPS 0.10 -4.6 0.15 1.7 0.20 1.9
Source: Berenberg estimates
expect an easing towards the end of 2022; 4) the company will release its
new 2022 guidance in April and, given the strong backlog update and recent Share data
newsflow, we believe there may be room for improvement compared to the Shares outstanding (m) 111
current targets. Enterprise value (EUR m) 847
Daily trading volume 259,675
● Valuation: We update our model to incorporate 2021 numbers and revised
forecasts, and to account for higher capex expectations. Our DCF now points
Key data
to a valuation of EUR11.40, while our SOTP points to EUR8.60, on the back
of peers de-rating; we therefore revise down our price target, which, based Price/book value 5.1
on an equal blend of these two methodologies, now points to EUR10.00 Net debt/equity 67.2%
CAGR sales 2021-2023 40.4%
(from EUR11.00) and implies c50% upside. SECO trades on c16x FY 2023E CAGR EPS 2021-2023 46.1%
EV/EBITDA for a 24% 2022-25 adjusted EBITDA CAGR, a valuation that, in
our view, does not factor in the full growth potential of the company, which
we believe will be further confirmed in June this year, when SECO will
provide an update on the 2023 CLEA targets. As such, we reiterate our Buy
recommendation.

Y/E 31/12, EUR m 2019 2020 2021 2022E 2023E

Sales 66 80 116 190 229
EBITDA 12 16 25 44 54
EBIT 9 11 17 31 38 Source: Thomson Reuters Datastream
Net profit 6 8 11 20 26
Y/E net debt (net cash) 12 18 109 112 101
EPS (reported) 0.07 0.05 0.04 0.13 0.18
EPS (recurring) 0.07 0.08 0.09 0.15 0.20
CPS 0.03 0.10 0.36 -0.08 0.04
DPS 0.00 0.00 0.00 0.00 0.00
Gross margin 47.4% 47.2% 47.3% 47.4% 48.6%
EBITDA margin 18.0% 20.9% 22.5% 23.6% 24.1%
EBIT margin 13.4% 14.6% 15.0% 16.4% 16.7%
Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0%
ROCE 15.9% 15.5% 8.3% 9.3% 11.0%
EV/sales - - 7.3 4.5 3.7
EV/EBITDA - - 33.4 19.3 15.6
EV/EBIT - - 50.3 27.7 22.5
P/E - - 68.1 42.0 31.9
Source: Company data, Berenberg

Anna Frontani Trion Reid

Analyst Analyst
+44 20 3465 2697 +44 20 3753 3113
anna.frontani@berenberg.com trion.reid@berenberg.com

1
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

BUY Investment thesis

● SECO services attractive end-markets in which megatrends drive
24 March 2022 Reuters IOT.MI
growth: In the context of the growing IoT market, SECO has adopted
Bloomberg IOT IM a strategy aimed at increasing value for its customers active in
Current price Price target multiple end-markets, which have diverse underlying dynamics, and
which are notable for their double-digit rates of growth.
Market cap (EUR m) 716
EUR6.46 EUR 10.00 ● SECO offers an end-to-end proposition, with an increasing focus
24/03/2022 Milan Close EV (EUR m) 847 on IoT architecture and AI: In contrast to other players, SECO offers
Trading volume 259,675 an end-to-end solution to its customers, and it is increasingly
Free float 30.8% strengthening its IoT-AI capabilities.

Non-institutional shareholders Share performance ● Organic growth will be powered by SECO’s PaaS and value-added
services: SECO has a well-defined strategy for growth, based on
Founders 50.8%, Olivetti SpA 9.6% High 52 weeks EUR 9.70 further evolving its product offering from modules to PaaS (platform
Low 52 weeks EUR 3.56 as a service) and increasing its presence in high-growth markets and
key geographies.
Business description Performance relative to
SECO is a leading Italy-based high-tech SXXP FTSE MIB ● An accelerated M&A strategy to consolidate the competitive
company that designs and manufactures advantage: We expect SECO to pursue an accelerated acquisitive
1mth 1.1% 6.9% strategy focused on entering new geographies, expanding the
embedded systems and IoT-AI (internet of 3mth -12.1% -8.0%
things; artificial intelligence) solutions. It was customer base, further vertical integration and acquiring new
founded in 1979 in Arezzo, Italy, by Luciano 12mth - - capabilities in the software sphere.
Secciani and Daniele Conti, who are still the
reference shareholders to this day.

Profit and loss summary Cash flow summary

EUR m 2019 2020 2021 2022E 2023E EUR m 2019 2020 2021 2022E 2023E
Revenues 66 80 116 190 229 Net income 6 5 7 17 24
EBITDA 12 16 25 44 54 Depreciation 4 6 9 13 17
EBITA 13 15 24 47 56 Working capital changes -8 -4 -5 -18 -6
EBIT 9 11 17 31 38 Other non-cash items 0 2 3 3 3
Associates contribution - - - - - Operating cash flow 2 10 14 15 37
Net interest -1 -1 -2 -4 -4 Capex -8 -9 -14 -17 -25
Tax -2 -1 -1 -5 -7 FCFE -6 1 0 -1 13
Minorities 1 1 2 3 4 Acquisitions, disposals - - - - -
Net income adj. 6 8 11 20 26 Other investment CF 1 -7 -92 -2 -1
EPS reported 0.07 0.05 0.04 0.13 0.18 Dividends paid 0 0 0 0 0
EPS adjusted 0.07 0.08 0.09 0.15 0.20 Buybacks, issuance 0 0 0 0 0
Year end shares 0 78 110 111 111 Change in net debt 5 6 92 3 -11
Average shares 76 77 96 110 111 Net debt 12 18 109 112 101
DPS 0.00 0.00 0.00 0.00 0.00 FCF per share 0.00 0.02 0.00 -0.01 0.11

Growth and margins Key ratios

2019 2020 2021 2022E 2023E 2019 2020 2021 2022E 2023E
Revenue growth 18.9% 21.2% 46.3% 63.4% 20.6% Net debt / equity - - 67.2% 61.4% 48.2%
EBITDA growth 41.6% 35.3% 58.9% 73.8% 23.6% Net debt / EBITDA 1.0 1.1 4.3 2.6 1.9
EBIT growth 25.1% 27.0% 50.7% 82.1% 23.3% Avg cost of debt -1.7% -1.3% -1.3% -2.8% -2.3%
EPS adj growth 11.5% 17.1% 12.9% 62.1% 31.8% Tax rate 26.9% 10.2% 14.1% 24.0% 24.0%
FCF growth -16.4% -123.0% -102.7% 3028.9% -1108.1% Interest cover 19.6 15.5 6.8 6.0 9.5
EBITDA margin 18.0% 20.9% 22.5% 23.6% 24.1% Payout ratio 0.0% 0.0% 0.0% 0.0% 0.0%
EBIT margin 13.4% 14.6% 15.0% 16.4% 16.7% ROCE 15.9% 15.5% 8.3% 9.3% 11.0%
Net income margin 8.0% 5.1% 3.6% 7.6% 8.7% Capex / sales - - - - -
FCF margin -9.8% 1.9% 0.0% -0.7% 5.5% Capex / depreciation - - - - -

Valuation metrics Key risks to our investment thesis

2019 2020 2021 2022E 2023E ● The company’s ability to properly execute M&A integration presents a
P / adjusted EPS - - 68.1 42.0 31.9 risk.
P / book value - - 5.1 5.0 4.8 ● Increasing competition and the capacity of the company to offer
FCF yield 0.0% 0.0% 0.0% -0.1% 1.5% innovative products are also risks.
Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0%
EV / sales - - 7.3 4.5 3.7 ● Key raw materials and components may not be easily available, or
EV / EBITDA - - 33.4 19.3 15.6 available only at higher prices.
EV / EBIT - - 50.3 27.7 22.5 ● Customer concentration is a risk.
EV / FCF 0.0 0.0 -21112.0 -676.5 67.3
EV / cap. employed 0.0 0.0 2.6 2.5 2.4 ● The company may struggle to hire and retain qualified personnel.
● Cyberattacks could compromise company information systems.

Anna Frontani Trion Reid

Analyst Analyst
+44 20 3465 2697 +44 20 3753 3113
anna.frontani@berenberg.com trion.reid@berenberg.com
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

Key takeaways
FY 2021 net sales grew by 47% yoy (or 28% on an organic basis), with Q4 reaching an all-time
high, at EUR45.4m, thanks partly to the contribution from M&A. With the acquisition of Garz
& Fricke, SECO strengthened its footprint in EMEA, which at the end of 2021 accounted for
75% of group sales. Among the verticals, Industrial, Fitness, Medical and Vending account
for 83% of sales.

Figure 1: SECO sales breakdown by geography Figure 2: SECO sales breakdown by end-market

APAC , 6% RoW, 1% Others, 8%

Defence and PKE*, 3%
Aerospace, 3%
USA, 18% Transport, 4% Industrial,
35%
Vending and
Italy, 50% Distribution,
14%

EMEA (ex Medical,

Fitness,
Italy), 25% 16%
17%

Source: Company reports, Berenberg estimates Source: Company reports, Berenberg estimates. *Professional kitchen equipment

SECO’s order backlog increased to EUR157m (as of February 2022), more than doubling its
size on a lfl basis versus February last year, thanks to new client wins and existing customers
digitising more lines of products. As of October 2021, the order backlog amounted to
EUR114.5m.
The acceleration in the distribution of CLEA is proceeding ahead of our expectations.
Management said that currently ongoing negotiations with leads and customers involve a
total pipeline of over 500k devices that can potentially be connected to CLEA over 2022-23
(for 2022 we now forecast an installed base of c175k units, and c490k for 2023). We would
expect quantitative guidance on the software services business in June, when management
will update the market on 2023 CLEA targets.
On a pro-forma basis, 2021 software revenue – including the contribution from Garz & Fricke
and Oro Networks – was EUR7.4m, of which cEUR5.0m was non-recurring engineering fees
and a couple of million was from recurring revenue. For 2022 we expect non-recurring
engineering fees to still account for the majority of software sales as CLEA gains traction
with customers.
As expected, the shortage of electronic components has been affecting the first months of
2022, and we should expect this trend to continue until Q3-Q4 2022. In the meantime, the
company has been taking several mitigating actions, such as increasing the levels of
inventory, negotiating pricing increases with customers (+11% starting from Q4 2021),
redesigning products to avoid the affected components, and sourcing extra chips from
brokers. SECO had EUR4m of unfulfilled orders in Q4 2021 that it shifted to Q1 2022.
Despite this negative impact – which in Q4 led to a gross profit margin of 45% – we note that
SECO managed to deliver a quarterly adjusted EBITDA margin of 24.8%, thanks to internal
efficiencies and tight control of operations.
Regarding the Russia/Ukraine conflict and its effects on the industry, we understand from
management that it has actually created a favourable effect on the supply of electronic
components. The components that were destined for Russia have been put back on the
market, and SECO has been able to benefit from this by buying significant stock.
In 2021, capex rose to EUR13.7m (c12% of net sales), from EUR8.7m in 2020. While
maintenance capex should be in the range of 2-2.5% of revenue in the future, growth capex
is expected to be between EUR3m and EUR4m in 2022, as the company is investing in
Germany (adding additional production capacity over the years) and in China (in anticipation
of strong business growth). For 2022, we now expect EUR16.7m of total capex.

3
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

Net debt rose from EUR17.8m in 2020 to EUR109.5m in 2021 mainly due to the acquisition
of Garz & Fricke (while on an adjusted basis, which by company definition excludes VAT
credit and lease liabilities, it went from EUR11.4m to EUR97.5m). We understand the higher-
than-expected net debt (our forecast for the reported figure was EUR94.4m) is related to the
shortage situation, as the company needed to source materials and components at an early
stage – relative to normal operating conditions – in order to assure deliveries to clients and
continuity in production.
While the company released its Q1 2022 guidance a few weeks ago (110-115% sales growth,
of which 53-58% is organic), we expect the 2022 guidance to be published in April.
Currently, the latest guidance (provided in October 2021) suggests FY 2022 revenue of at least
EUR180m, and EBITDA of at least EUR40m, which, considering the latest newsflow on the
order backlog, now seems conservative to us.
Looking at the longer term, by 2025 the company expects to build a market-leading position
in the IoT space, with revenue exceeding EUR400m, mixing organic growth and M&A.

4
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

Valuation
In order to account for the fast-growing IoT segment and the increasing share of the
software services business, we value SECO on an equally weighted blend of a DCF and an
SOTP based on peer multiples. Our DCF points to a valuation of EUR11.40, while our SOTP
approach leads to a EUR8.60 valuation. Combining both methodologies, we obtain a price
target of EUR10.00.

DCF valuation
Figure 3: Our DCF valuation for SECO points to a value per share of EUR11.40
Explicit forecasts Fade period
TV
EURm 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Turnover 190 229 275 318 365 418 477 533 583 626 657
EBIT 27 34 44 56 79 95 115 134 153 171 187
Tax charge (7) (8) (11) (13) (19) (23) (28) (32) (37) (41) (45)
After-tax profit 21 26 34 42 60 72 87 102 116 130 142
D&A 13 17 21 25 28 31 34 37 38 39 39
Capex (17) (25) (28) (32) (26) (29) (33) (27) (29) (25) (26)
Change in WCR (18) (6) (12) (16) (16) (17) (19) (18) (17) (14) (10)
Free cash flow (1) 12 14 20 47 57 69 93 109 131 145 2,502
Present Value (1) 10 11 14 31 35 39 49 53 58 59 1,026
Total Present Value (EV) 1,385
Net cash/(debt) (131.0)
Net present value (E) 1,254
NOSH 110
Net present value per share [EUR] 11.4
Source: Berenberg estimates

SOTP valuation
We also value SECO using a sum-of-the-parts approach based on peer multiples. We believe
this method properly takes into account the potential of the CLEA business, which has a
different growth/risk profile compared to the edge platform/custom edge system
businesses.

Figure 4: Our SOTP valuation of SECO points to a value per share of EUR8.60

IoT Endpoints IoT PaaS

SECO
EURm Edge Platforms Custom Edge Systems Software Services (CLEA)
Net revenue 43.2 127.7 15.5 186.3

Gross Profit 17.3 59.6 11.2 88.2

Gross Margin 40% 47% 73% 47%
Costs for services* (2.7) (9.4) (1.8) (14.0)
Personnel costs** (6.6) (19.8) (7.1) (33.5)
EBITDA 8.0 30.4 2.3 40.7
EBITDA margin 18.5% 23.8% 15.1% 21.9%

IoT Endpoints EURm

SECO EBITDA FY2022E 38.4
Avg. FY2022E EV/EBITDA 24.4x (15% premium to Advantech)
EV 938

IoT PaaS EURm

SECO Sales FY2023E 24.4
Avg. FY2023E EV/Sales 5.7x
EV 138

SECO Group EURm

Total EV 1,076
Net cash/(debt) (131.0)
Total E 945
NOSH 110.5
Net present value per share [EUR] 8.6
Source: Berenberg estimates. *Costs for services allocation is a Berenberg estimate based on the gross profit split.
**Personnel costs split is a Berenberg estimate based on our assumptions for headcount allocation

5
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

We value the edge platform/custom edge system businesses together, using a FY 2022E
EV/EBITDA multiple of 24.4x; we apply a 15% premium to Advantech because SECO’s
business model is predicated on an end-to-end proposition with the value-add of AI
solutions. On the other hand, for the CLEA business we use an FY 2023E EV/sales multiple
of 5.7x, which is the average of PTC and C3.ai, because: 1) this is the most common approach
in the software industry; and 2) it captures the growth potential of this nascent business in
the medium/long term.

6
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

Financials
Income Statement €m 2018A 2019A 2020A 2021A 2022E 2023E 2024E 2025E

Net Revenue 54.4 65.4 76.1 112.3 186.3 225.5 271.0 317.6
Change (%) - 19% 21% 46% 63% 21% 20% 17%
Edge Platforms 14.7 16.2 17.0 24.2 43.2 44.3 46.0 47.4
Custom Edge Systems 39.8 49.2 58.8 81.0 127.7 156.9 187.8 220.8
Software Service - - 0.4 7.0 15.5 24.4 37.2 49.4
Other Income 0.8 0.3 3.4 4.0 3.7 3.7 3.7 3.7
Total Group Revenue 55.2 65.7 79.5 116.3 190.0 229.2 274.7 321.3
Costs for raw materials and change in inventories (30.3) (34.4) (40.2) (59.2) (101.8) (119.5) (138.6) (158.0)
Gross Profit 24.2 31.0 36.0 53.1 88.2 109.7 136.1 163.3
Margin (%) 44.4% 47.4% 47.2% 47.3% 47.4% 48.6% 50.2% 51.4%
Costs for services (6.0) (6.5) (6.6) (12.8) (14.0) (16.9) (20.3) (23.8)
Personnel costs (9.3) (11.7) (16.1) (23.5) (33.5) (41.7) (50.1) (58.8)
Other costs (incl. M&A) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

EBITDA 8.2 11.5 12.1 18.1 40.7 51.1 65.7 80.8

Margin (%) 15.1% 17.5% 15.9% 16.1% 21.9% 22.6% 24.2% 25.4%
Adjustments 0.1 0.3 3.8 7.2 3.3 3.3 3.3 3.3
Adjusted EBITDA 8.3 11.8 15.9 25.3 44.0 54.3 68.9 84.0
Margin (%) 15.3% 18.0% 20.9% 22.5% 23.6% 24.1% 25.4% 26.5%
D&A (1.6) (3.1) (5.5) (9.2) (13.4) (16.6) (21.3) (25.0)
Depreciation as % of sales 3.0% 4.7% 7.2% 8.1% 7.2% 7.4% 7.9% 7.9%

Impairment of receivables and provisions (0.1) (0.1) (0.0) (0.1) 0.0 0.0 0.0 0.0
Other operating expenses (1.0) (1.5) (3.8) (2.2) 0.0 0.0 0.0 0.0

EBIT 6.9 8.5 7.3 9.5 27.3 34.5 44.3 55.8

Margin (%) 12.8% 12.9% 9.6% 8.5% 14.7% 15.3% 16.4% 17.6%

Adjusted EBIT 7.0 8.8 11.2 16.8 30.6 37.7 47.6 59.0
Margin (%) 12.9% 13.4% 14.6% 15.0% 16.4% 16.7% 17.6% 18.6%
Net Financial Expenses (0.4) (0.4) (0.5) (1.3) (4.5) (3.5) (3.3) (3.1)
Exchange (losses)/gain (0.3) (0.1) (0.7) (0.6) 0.0 0.0 0.0 0.0
PBT 6.2 8.0 6.1 7.6 22.9 30.9 41.0 52.6
Tax (1.6) (2.1) (0.6) (1.1) (5.5) (7.4) (9.8) (12.6)
Effective Tax Rate 26.4% 26.9% 10.2% 14.1% 24.0% 24.0% 24.0% 24.0%
Net profit 4.6 5.8 5.5 6.5 17.4 23.5 31.2 40.0
Margin (%) 8.4% 8.9% 7.2% 5.8% 9.3% 10.4% 11.5% 12.6%

Net Profit / (Loss) attributable to non-controlling interests (0.0) 0.6 1.4 2.4 2.9 3.5 4.7 6.0

Adj. Net profit 4.6 6.1 7.9 11.5 19.9 26.0 33.6 42.5
Margin (%) 8.5% 9.3% 10.4% 10.2% 10.7% 11.5% 12.4% 13.4%

Number of shares (m) 71.8 76.3 76.6 96.0 110.5 110.8 111.1 111.5

EPS 0.06 0.07 0.05 0.04 0.13 0.18 0.24 0.30

Adjusted EPS 0.06 0.07 0.08 0.09 0.15 0.20 0.26 0.33

7
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

Balance Sheet €m 2018A 2019A 2020A 2021A 2022E 2023E 2024E 2025E

Non-Current Assets 18.3 26.9 36.6 236.4 240.7 250.3 259.2 268.1
Property, plant and equipment 11.1 14.1 13.3 16.8 15.6 17.8 17.8 17.8
Intangible assets 5.0 8.0 13.0 56.4 61.5 68.2 76.4 84.3
Right-of-use assets 1.2 1.1 1.9 9.9 10.3 10.9 11.7 12.6
Goodwill 0.1 3.1 7.1 148.5 148.5 148.5 148.5 148.5
Non-current financial assets 0.5 0.4 0.2 1.8 1.8 1.8 1.8 1.8
Deferred tax assets 0.4 0.2 0.6 2.3 2.3 2.3 2.3 2.3
Other non-current assets 0.0 0.0 0.5 0.8 0.8 0.8 0.8 0.8

Current Assets 60.5 70.6 81.8 167.1 171.6 188.4 214.3 249.3
Inventories 19.0 26.8 31.4 61.7 61.8 63.5 70.2 80.3
Trade receivables 18.1 19.1 15.0 36.7 50.7 61.4 73.8 86.4
Current tax receivables 8.0 6.7 9.1 6.4 6.4 6.4 6.4 6.4
Other receivables 0.5 1.4 2.6 3.5 3.5 3.5 3.5 3.5
Cash and cash equivalents 14.8 16.6 23.7 58.8 49.2 53.7 60.5 72.7

Total Assets 78.7 97.5 118.4 403.5 412.3 438.8 473.6 517.4

Non-Current Liabilities 13.9 17.8 31.0 161.5 152.4 142.7 133.1 123.8
Employee benefits 2.1 2.5 3.0 3.1 3.1 3.1 3.1 3.1
Provisions 0.2 0.1 0.1 0.7 0.7 0.7 0.7 0.7
Deferred tax liabilities 0.1 0.1 0.0 12.0 12.0 12.0 12.0 12.0
Non-current financial liabilities 10.9 14.4 26.1 138.1 127.9 117.7 107.5 97.3
Non-current lease liabilities 0.6 0.5 1.2 7.0 8.1 8.6 9.1 10.0
Other non-current liabilities 0.0 0.2 0.6 0.6 0.6 0.6 0.6 0.6

Current Liabilities 30.5 35.2 36.4 79.0 76.9 86.5 96.5 106.5
Current financial liabilities 5.4 8.4 8.5 11.5 14.5 17.4 20.4 23.3
Current portion of non-current financial liabilities 4.3 5.1 5.2 10.2 10.2 10.2 10.2 10.2
Current lease liabilities 0.4 0.4 0.5 1.6 0.8 1.0 1.2 1.2
Trade payables 14.9 15.4 15.3 39.9 35.6 42.0 48.9 56.0
Other payables 3.2 3.5 5.4 12.3 12.3 12.3 12.3 12.3
Current tax liabilities 2.2 2.4 1.5 3.5 3.5 3.5 3.5 3.5

Equity 34.4 44.4 51.0 163.0 182.9 209.6 244.0 287.1

Total Liabilities and Equity 78.7 97.5 118.4 403.5 412.3 438.8 473.6 517.4
Net Debt/(Cash) 6.9 12.1 17.8 109.5 112.3 101.1 87.9 69.3
Net Debt/EBITDA 0.8x 1.0x 1.1x 4.3x 2.6x 1.9x 1.3x 0.8x
Adjusted Net Debt/(Cash) (0.2) 7.3 11.4 97.5 - - - -

8
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

Cash Flow €m 2018A 2019A 2020A 2021A 2022E 2023E 2024E 2025E

Net profit for the year 4.6 5.8 5.5 6.5 17.4 23.5 31.2 40.0
Income taxes 1.6 2.1 0.6 1.1 5.5 7.4 9.8 12.6
Depreciation and amortization 1.6 3.1 5.5 9.2 13.4 16.6 21.3 25.0
Allocations of provisions, impairment of receivables and of inventory 0.3 0.7 0.8 0.0 0.0 0.0 0.0 0.0
Net change in employee benefits 0.4 0.3 0.3 0.0 0.0 0.0 0.0 0.0
Financial income (0.0) (0.0) (0.0) 0.0 (0.1) (0.1) (0.1) (0.1)
Financial costs 0.4 0.4 0.5 1.3 4.6 3.6 3.5 3.3
Exchange (gains)/losses 0.3 0.1 0.7 0.6 0.0 0.0 0.0 0.0
Net business acquisition income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Share-based payment costs (0.5) 0.0 1.6 3.2 3.2 3.2 3.2 3.2
Operating cash flows before movements in working capital 8.7 12.5 15.6 21.9 43.9 54.3 68.9 83.9
(Increase)/decrease in trade receivables (excl. M&A) 10.4 (1.4) 4.9 (15.4) (14.0) (10.7) (12.4) (12.7)
(Increase)/decrease in inventories (excl. M&A) (4.0) (7.9) (4.6) (15.9) (0.1) (1.6) (6.8) (10.1)
Increase/(decrease) in trade payables (excl. M&A) (8.5) 0.1 (1.2) 21.5 (4.4) 6.4 6.9 7.0
(Increase)/decrease in current tax receivables (2.4) 1.3 (2.4) 5.4 0.0 0.0 0.0 0.0
Increase/(decrease) in current tax liabilities 0.8 (0.0) (0.5) 0.0 0.0 0.0 0.0 0.0
(Increase)/decrease in other receivables (0.2) (0.9) (1.0) (1.5) 0.0 0.0 0.0 0.0
Increase/(decrease) in other payables (0.1) 0.2 1.3 0.0 0.0 0.0 0.0 0.0
(Increase)/decrease in other non-current assets (0.2) 0.2 (0.5) (0.4) 0.0 0.0 0.0 0.0
Increase/(decrease) in other non-current liabilities (0.1) 0.3 0.4 0.0 0.0 0.0 0.0 0.0
Utilisations of provisions (0.1) (0.1) (0.0) 0.0 0.0 0.0 0.0 0.0
Interest received 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1
Interest paid (0.4) (0.4) (0.5) (0.9) (4.6) (3.6) (3.5) (3.3)
Realized (gains)/losses on foreign exchange (0.0) (0.2) (0.1) 0.6 0.0 0.0 0.0 0.0
Income taxes paid (2.3) (1.9) (1.1) (1.6) (5.5) (7.4) (9.8) (12.6)
Cash From/(For) Operations 1.6 1.8 10.2 13.6 15.5 37.4 43.5 52.4

(Additions)/Disposal of property, plant and equipment (5.9) (4.1) (1.3) (2.0) (4.4) (6.8) (8.1) (9.5)
(Additions)/Disposal of intangible assets (3.4) (4.1) (7.4) (11.6) (12.4) (18.0) (20.3) (22.2)
(Additions)/Disposal of non-current financial assets 0.3 0.1 0.1 (1.6) 0.0 0.0 0.0 0.0
Acquisition of subsidiaries net of cash and cash equivalents 0.8 (1.8) (4.9) (128.6) 0.0 0.0 0.0 0.0
Cash From/(For) Investments (8.2) (10.0) (13.5) (143.8) (16.7) (24.8) (28.5) (31.8)

Proceeds from bank borrowings 11.9 10.0 16.5 124.3 0.0 0.0 0.0 0.0
Payment of bank borrowings (4.7) (4.7) (5.4) (43.1) (10.2) (10.2) (10.2) (10.2)
Increase/(decrease) in current financial liabilities 0.5 2.0 0.3 0.8 3.0 3.0 3.0 3.0
Payment of lease liabilities (0.5) (0.6) (0.6) (0.8) (0.5) (0.8) (1.0) (1.2)
Dividends paid (3.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net increase in capital payments / (buyback) 9.5 0.0 0.0 87.2 0.0 0.0 0.0 0.0
Share capital increase in subsidiaries 0.0 3.4 0.0 (3.8) 0.0 0.0 0.0 0.0
Cash From/(For) Financing 13.6 10.1 10.8 164.7 (7.8) (8.1) (8.2) (8.4)

Cash at Begining of Period 7.8 14.8 16.6 23.7 58.2 49.2 53.7 60.5
Net Change in Group Cash 7.0 1.9 7.5 34.5 (9.0) 4.5 6.8 12.2
Cash at End of Period 14.8 16.6 23.7 58.2 49.2 53.7 60.5 72.7

FCF (7.7) (6.4) 1.5 (0.0) (1.3) 12.6 15.0 20.7

9
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

Please note that the use of this research report is subject to the conditions and restrictions set forth in the “General investment-related
disclosures” and the “Legal disclaimer” at the end of this document.
For analyst certification and remarks regarding foreign investors and country-specific disclosures, please refer to the respective paragraph at
the end of this document.

Disclosures in respect of Article 20 of Regulation (EU) No. 596/2014 of the European Parliament and of the
Council of 16 April 2014 on market abuse and the UK Market Abuse Regulation (market abuse regulation – MAR)

Company Disclosures
SECO SpA no disclosures

(1) Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”) and/or its affiliate(s) was Lead Manager or Co-Lead
Manager over the previous 12 months of a public offering of this company.
(2) The Bank acts as Designated Sponsor/Market Maker for this company.
(3) Over the previous 12 months, the Bank and/or its affiliate(s) has effected an agreement with this company for investment
banking services or received compensation or a promise to pay from this company for investment banking services.
(4) The Bank and/or its affiliate(s) holds 5% or more of the share capital of this company.
(5) The Bank holds a long position of more than 0.5% in shares of this company.
(6) The Bank holds a short position of more than 0.5% in shares of this company.

Positions held within investment funds managed by the Bank fall within disclosure (5) above and are calculated using the latest
available data at the time of publication of this report.

Production of the recommendation completed: 24.03.2022, 17:30 GMT

Historical price target and rating changes for SECO SpA in the last 12 months

Date Price target - EUR Rating First dissemination GMT Initiation of coverage
01 December 21 11.00 Buy 2021-12-02 06:55 01 December 21
24 March 22 10.00 Buy -

Click here for a list of all recommendations on any financial instrument or issuer that were disseminated during the preceding 12-
month period.
Berenberg Equity Research ratings distribution and in proportion to investment banking services on a quarterly basis, as of 1
January 2022

Buy 61.22 % 19.20 %

Sell 2.46 % 0.00 %
Hold 36.32 % 2.06 %

Valuation basis/rating key

The recommendations for companies analysed by Berenberg’s Equity Research department are made on an absolute basis for which
the following three-step rating key is applicable:
Buy: Sustainable upside potential of more than 15% to the current share price within 12 months;
Sell: Sustainable downside potential of more than 15% to the current share price within 12 months;
Hold: Upside/downside potential regarding the current share price limited; no immediate catalyst visible.
NB: During periods of high market, sector, or stock volatility, or in special situations, the recommendation system criteria may be
breached temporarily.

Competent supervisory authority

Financial Conduct Authority, 12 Endeavour Square, London E20 1JN, United Kingdom; Bundesanstalt für
Finanzdienstleistungsaufsicht (BaFin) - Federal Financial Supervisory Authority, Graurheindorfer Straße 108, 53117 Bonn and Marie-
Curie-Str. 24-28, 60439 Frankfurt am Main, Germany.

10
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

General investment-related disclosures

Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”) has made every effort to carefully research all information
contained in this financial analysis. The information on which the financial analysis is based has been obtained from sources which we
believe to be reliable such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well as the company
which is the subject of this financial analysis.
Only that part of the research note is made available to the issuer (who is the subject of this analysis) which is necessary to properly
reconcile with the facts. Should this result in considerable changes a reference is made in the research note.
Opinions expressed in this financial analysis are our current opinions as of the issuing date indicated on this document. The companies
covered by Berenberg are continuously followed by the analyst. Based on developments with the relevant company, the sector or the
market which may have a material impact on the research views, research reports will be updated as it deems appropriate.
The functional job title of the person/s responsible for the recommendations contained in this report is “Equity Research Analyst”
unless otherwise stated on the cover.
The following internet link provides further remarks on our financial analyses:
https://www.berenberg.de/files/Investment Banking/Equity Research/Hinweise_zu_Finanzanalysen_ENG.pdf

Legal disclaimer
This document has been prepared by Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as “the Bank”). This document does not
claim completeness regarding all the information on the stocks, stock markets or developments referred to in it.
On no account should the document be regarded as a substitute for the recipient procuring information for himself/herself or exercising
his/her own judgements.
The document has been produced for information purposes for institutional clients or market professionals.
Private customers, into whose possession this document comes, should discuss possible investment decisions with their customer
service officer as differing views and opinions may exist with regard to the stocks referred to in this document.
This document is not a solicitation or an offer to buy or sell the mentioned stock.
The document may include certain descriptions, statements, estimates, and conclusions underlining potential market and company
development. These reflect assumptions, which may turn out to be incorrect. The Bank and/or its employees accept no liability
whatsoever for any direct or consequential loss or damages of any kind arising out of the use of this document or any part of its content.
The Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this document, derivatives thereon or
related financial products. The Bank and/or its employees may underwrite issues for any securities mentioned in this document,
derivatives thereon or related financial products or seek to perform capital market or underwriting services.

Analyst certification
I, Anna Frontani, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all
of the subject securities or issuers discussed herein.
In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific
recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed
by the Bank or its affiliates.

I, Trion Reid, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of
the subject securities or issuers discussed herein.
In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific
recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed
by the Bank or its affiliates.

Remarks
The preparation of this document is subject to regulation by German law, where prepared by analysts in Germany. Where prepared by
analysts in the UK, preparation of this document is subject to UK law. The distribution of this document in other jurisdictions may be
restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such
restrictions. This document is meant exclusively for institutional investors and market professionals, but not for private customers. It
is not for distribution to or the use of private investors or private customers.

11
SECO SpA (IOT IM)
European Mid-Cap – Technology Hardware

United States of America

This document has been prepared exclusively by the Bank. Although Berenberg Capital Markets, LLC (“BCM”), an affiliate of the Bank
and registered US broker-dealer, distributes this document to certain investors, BCM does not provide input into its contents, nor does
this document constitute research of BCM. In addition, this document is meant exclusively for institutional investors and market
professionals, but not for retail investors or private customers. It is not for distribution to or the use of retail investors or private
customers. BCM accepts responsibility for this research document’s contents and institutional investors receiving this research and
wishing to effect any transactions in any security discussed herein should do so through BCM and not the Bank.
Please contact Berenberg Capital Markets, LLC (+1 646 949 9000) if you require additional information.

Third-party research disclosures

Company Disclosures
SECO SpA no disclosures

(1) BCM or its affiliates owned 1% or more of the outstanding shares of any class of the subject company by the end of the prior
month.
(2) The subject company is or was, during the 12-month period preceding the date of distribution of this report, a client of BCM or
its affiliates. BCM or its affiliates provided the subject company non-investment banking, securities-related services.
(3) BCM or its affiliates received compensation from the subject company during the past 12 months for products or services other
than investment banking services.
(4) During the previous 12 months, BCM or its affiliates has managed or co-managed any public offering for the subject company.
(5) BCM is making a market in the subject securities at the time of the report.
(6) The subject company is or was, during the 12-month period preceding the date of distribution of this report, a client of BCM or its
affiliates. BCM or its affiliates provided the subject company investment banking, securities-related services.
(7) BCM or its affiliates received compensation for investment banking services in the past 12 months, or expects to receive such
compensation in the next 3 months.
(8) There is another potential conflict of interest of the analyst(s), BCM, of which the analyst knows or has reason to know at the
time of publication of this research report.
(9) The research analyst or a member of the research analyst’s household serves as an officer, director, or advisory board member
of the subject company
(10) The research analyst or a member of the research analyst’s household has a financial interest in the equity or debt securities of
the subject company (including options, rights, warrants, or futures).
(11) The research analyst has received compensation from the subject company in the previous 12 months.
* For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the ‘Disclosures in respect of section 34b of the
German Securities Trading Act (Wertpapierhandelsgesetz – WpHG)’ section above.

Copyright
The Bank reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or
duplicated in any form by any means or redistributed without the Bank’s prior written consent.

© 2022 Joh. Berenberg, Gossler & Co. KG

12
Contacts

JOH. BERENBERG, GOSSLER & CO. KG

Internet www.berenberg.com E-mail: firstname.lastname@berenberg.com

EQUITY RESEARCH
GENERAL MID CAP BUSINESS SERVICES, LEISURE & TRANSPORT MATERIALS
MID CAP - DACH BUSINESS SERVICES BANKS AND DIVERSIFIED FINANCIALS (ctd) CHEMICALS
Catharina Claes +44 20 3207 7855 Tom Burlton +44 20 3207 7852 Eoin Mullany +44 20 3207 7854 Sebastian Bray +44 20 3753 3011
Charlotte Friedrichs +44 20 3753 3077 Cormac Keane +44 20 3753 3220 Hal Potter +44 7974 177 738 Andrés Castanos-Mllor +44 20 3753 3218
Gustav Froberg +44 20 3465 2655 LEISURE Peter Richardson +44 20 3465 2681 Anthony Manning +44 20 3753 3092
Thomas Junghanns +49 69 9130 90470 Jack Cummings +44 20 3753 3161 INSURANCE Priyanka Patel +44 20 465 2686
Igor Kim +49 69 9130 90471 Stuart Gordon +44 20 3207 7858 Thomas Bateman +44 20 3465 2665 Adrien Tamagno +44 20 3753 3057
Gerhard Orgonas +44 20 3465 2635 Benjamin Sandland-Taylor +44 7816 992 849 Michael Huttner +44 20 3207 7892 Fabian Weinstock +44 20 3753 3060
Benjamin Pfannes-Varrow +44 20 3465 2620 TRANSPORT & LOGISTICS Kathryn Fear +44 20 3753 3247 CONSTRUCTION
Wolfgang Specht +49 69 9130 90476 Conor Dwyer +44 20 3753 3216 Tryfonas Spyrou +44 20 3753 3058 Harry Goad +44 20 3753 3061
Yasmin Steilen +49 69 9130 90739 William Fitzalan Howard +44 20 3465 2640 REAL ESTATE METALS & MINING
Lasse Stueben +44 20 3753 3208 Adrian Yanoshik +44 20 3753 3073 Kai Klose +44 20 3207 7888 Oliver Grewcock +44 20 3753 3215
Karl-Oskar Vikstroem +44 20 3465 2647 Nithin Kumar Devaraj +44 20 3465 2680 Jonathan Guy +44 7980 937 628
MID CAP - EU core CONSUMER Richard Hatch +44 20 3753 3070
Edward Bottomley +44 20 3465 2746 BEVERAGES HEALTHCARE Charlie Rothbarth +44 20 3753 3105
Fraser Donlon +44 20 3465 2674 Oliver Anderson +44 20 3753 3173 MED. TECH/SERVICES
Anna Frontani +44 20 3465 2697 Javier Gonzalez Lastra +44 20 3465 2719 Beatrice Allen +44 20 3465 2662 TMT
Remi Grenu +44 20 3207 7806 Ellis Gooden +44 20 3753 3199 Sam England +44 20 3465 2687 TECHNOLOGY
Christoph Greulich +44 20 3753 3119 FOOD MANUFACTURING AND HPC Michael Healy +44 20 3753 3201 Nay Soe Naing +44 203 753 3131
Vasiliki Kotlida +44 7817 137 112 Fulvio Cazzol +44 20 3207 7840 Tom Jones +44 20 3207 7877 Tammy Qiu +44 20 3465 2673
Andreas Markou +44 20 3753 3022 Samantha Darbyshire +44 20 3753 3144 Edward Leane +44 7971 339 063 MEDIA
Axel Stasse +44 20 3753 3191 James Targett +44 20 3207 7873 Odysseas Manesiotis +44 20 3753 3200 Jamie Bass +44 20 3753 3217
Trion Reid +44 20 3753 3113 GENERAL RETAIL PHARMACEUTICALS Laura Janssens +44 20 3465 2639
Jan Richard +44 20 3753 3029 Valentine Forsans +44 20 3753 3268 Xian Deng +44 20 3753 3014 Saim Saeed +44 20 3465 2748
MID CAP - UK Sam Parry +44 20 3465 2690 Luisa Hector +44 7971 338 929 Sarah Simon +44 20 3207 7830
Charlotte Barrie +44 20 3753 3123 Graham Renwick +44 20 3207 7851 Kerry Holford +44 7971 338 932 TELECOMMUNICATIONS
Calum Battersby +44 20 3753 3118 Megan Mulcahy +44 20 3207 7893 David Burns +44 20 3753 3059
James Bayliss +44 20 3753 -3274 ENERGY Diana Na +44 20 3753 3181 Usman Ghazi +44 20 3207 7824
Michael Benedict +44 20 3753 3175 OIL & GAS Ellie Roberts +44 20 3753 3127 Laura Janssens +44 20 3465 2639
Joseph Bloomfield +44 20 3753 3248 Daniel Bothe +44 7971 338 947 Abhilash Mohapatra +44 20 3465 2644
Alexander Bowers +44 20 3753 3275 James Carmichael +44 20 3465 2749 INDUSTRIALS Carl Murdock-Smith +44 20 3207 7918
Robert Chantry +44 20 3207 7861 Richard Dawson +44 20 3207 7835 AEROSPACE & DEFENCE
Thomas Davies +44 20 3753 3104 David Eves +44 20 3207 7843 Ross Law +44 20 3465 2692 ECONOMICS
Joseph George +44 7814 945 132 Henry Tarr +44 20 3207 7827 George McWhirter +44 20 3753 3163 Kallum Pickering +44 20 3465 2672
Ned Hammond +44 20 3753 3017 UTILITIES AUTOMOTIVES Holger Schmieding +44 20 3207 7889
Tom Horne +44 20 3207 7913 Andrew Fisher +44 20 3207 7937 Romain Gourvil +44 20 3465 2722 EQUITY STRATEGY
Edward James +44 20 3207 7811 Amber Gleeson +44 20 3753 3034 CAPITAL GOODS Edward Abbott +44 20 3207 7871
Lydia Kenny +44 20 3753 3105 Marc Ip Tat Kuen +44 20 3465 2682 Laurence Brunt +44 20 3753 3162 Jonathan Stubbs +44 20 3207 7916
Kieran Lee +44 20 3465 2736 Lawson Steele +44 20 3207 7887 Marta Bruska +44 20 3753 3187 ESG
William Lindsay +44 20 3753 3242 Philip Buller +44 20 3753 3071 Ned Hammond +44 20 3753 3017
Lush Mahendrarajah +44 20 3207 7896 FINANCIALS Philippe Lorrain +44 20 3207 7823 Annabel Hay-Jahans +44 20 3465 2720
Benjamin May +44 20 3465 2667 BANKS AND DIVERSIFIED FINANCIALS Philip Modu +44 20 3465 2620 INVESTMENT TRUSTS
Bharath Nagaraj +44 20 3753 3044 Adam Barrass +44 20 3207 7923 Joel Spungin +44 20 3207 7867 Myrto Charamis +44 20 3465 2716
Ekaterina Naumova +44 20 3753 3055 Michael Christodoulou +44 20 3207 7920 Max Haycock +44 20 3753 3098
Ashton Olds +44 20 3753 3236 Andrew Lowe +44 20 3465 2743 THEMATIC RESEARCH
James Pardon +44 20 3207 7893 Hugh Moorhead +44 20 3207 7859 Toni Gurhy +44 20 3753 3185
Anthony Plom +44 20 3207 7908
Annita Ramanen +44 20 3753 3191
Jonathan Richards +44 20 3753 3171
Owen Shirley +44 20 3465 2731
Donald Tait +44 20 3753 3031
Sean Thapar +44 20 3465 2657

BERENBERG CAPITAL MARKETS LLC Member FINRA & SIPC Internet www.berenberg-us.com E-mail: firstname.lastname@berenberg-us.com

EQUITY RESEARCH HEALTHCARE

CONSTRUCTION BIOTECH/THERAPEUTICS REAL ESTATE ECONOMICS
Daniel Wang +1 646 949 9025 Esther Hong +1 646 949 9039 Justin Ages +1 646 949 9077 Mickey Levy +1 646 949 9099
Avantika Joshi +1 646 949 9059 Keegan Carl +1 646 949 9052
CONSUMER DISCRETIONARY Amy Qian +1 646 949 9049 Nate Crossett +1 646 949 9030
Anthony Graziano +1 646 949 9023 Zhiqiang Shu +1 917 797 7610 Connor Siversky +1 646 949 9037
Brian C. McNamara +1 646 949 9046
Alok Patel +1 646 285 2687 HEALTHCARE TECHNOLOGY SOFTWARE & IT SERVICES
Zachary Silverberg +1 646 949 9074 Gaurav Goparaju +1 646 949 9024 Andrew DeGasperi +1 646 949 9044
John Stansel +1 646 949 9088 Sophie Lee +1 646 949 9068
Rudy Yang +1 646 949 9047 MED. TECH/SERVICES Phillip Leytes +1 332 999 3121
Dev Weerasuriya +1 646 949 9076 Arsenije Matovic +1 646 949 9064
INDUSTRIAL TECHNOLOGY Gal Munda +1 646 949 9021
Andrew Azzi +1 646 949 9096 PHARMACEUTICALS Sunil Rajgopal +1 646 949 9089
Andrew Buscaglia +1 646 949 9040 Anita Dushyanth +1 646 949 9027 Andrew Smith +1 646 949 9071
Michael Filatov +1 646 949 9070 Alexandra Yaseen            +1 646 949 9075
Alexander Leach +1 646 949 9038 INDUSTRIAL MATERIALS
Jared Maymon +1 646 949 9065 Paretosh Misra +1 646 949 9031
Adam Stryer +1 646 949 9067 Christopher Rieger +1 646 949 9075

13