Driving the Green Revolution: A Deep Dive into Landi Renzo's Sustainable Vision

Landi Renzo, a name synonymous with innovation and sustainability in the automotive sector, signals investors seeking not just financial returns but a stake in the green revolution. In this comprehensive analysis, we explore the intricate landscape of Landi Renzo, a company at the forefront of the green revolution in the automotive industry.

Company Name: Landi Renzo
Industry: Specialist manufacturer of hydrogen, CNG and LNG components
Stock symbol: LR
Stock Listing: Milan and BATS Europe
Website: http://www.landirenzogroup.com/en/
Market capitalization: € 104 MEUR at publication
Target price: € 0.70 EUR by external analyst GBC
Share price: € 0,462 EUR at publication
Comparable companies: Westport Fuel Systems, Luxfer holdings, Cummins Introduction

Landi Renzo is not just another automotive company; it is a torchbearer of the green revolution. With a primary focus on alternative fuel systems, particularly hydrogen, natural gas, liquid natural gas (LNG) and liquefied petroleum gas (LPG), Landi Renzo positions itself as a key player in mitigating the environmental impact of traditional combustion engines. This vision aligns seamlessly with the global push towards greener transportation. Landi Renzo is a relatively unknown profitable cleantech gem from Italy, was founded back in 1954. Today, the company has over 900 employees in 50 countries and approximately 80% sales come from revenues outside their home market in Italy. The company specializes in all component and engine related to hydrogen, LPG, natural gas, and liquefied natural gas so-called LNG. The main focus of the company is the design, production and sale of components, as well as alternative engine systems for vehicles. Customers are car manufacturers (OEMs) as well as dealers and independent aftermarket fitters. Renewable fuels are something all investors interested in ESG should keep an eye on and one should therefore take a closer look at Landin Renzo as it will take more than electrification to achieve zero emissions, so-called Net Zero emissions on a global scale.  

Landi Renzo's strategic positioning within the automotive ecosystem is noteworthy. As governments worldwide tighten regulations on emissions, the demand for alternative fuel systems is on the rise. Landi Renzo, with its decades of experience and a comprehensive portfolio of solutions, is well-positioned to capitalize on this trend. The company's global reach and established partnerships add an extra layer of financial resilience.

Landi Renzo's success is not in isolation. The company's strategic partnerships with major automotive manufacturers and collaborations with governments underline its commitment to driving sustainable change on a global scale. These partnerships not only ensure a steady flow of business but also position Landi Renzo as a leader in the race towards greener mobility.

Goldman Sachs estimates that the hydrogen supply chain market will require $5000 billion dollars to reach Net Zero globally and that the total market for hydrogen production will increase by 100% by 2030 to a sum of $250 billion USD and $1000 billion respectively by 2050. These macro trends will reward hydrogen as a fuel in all different forms of transport and thus indirectly also be very beneficial for Landi Renzo.

Goldman Sachs also estimates that hydrogen will probably reach the same price picture as diesel for heavy trucks at filling stations as early as 2027, which clearly indicates that hydrogen will be an important component in the green transition for Net Zero globally.

Why is it interesting to invest in Landi Renzo right now if the company has been around since 1954?

Almost all forms of renewable fuels are on the rise and are in a huge growth curve. Many countries are currently striving for global domestic production of renewable fuels. In order for the earth globally to be able to reach zero emissions, ie net zero, it will require large investments in electrification but also in other types of infrastructure such as hydrogen, renewable natural gas (RNG), biogas, etc. Landi Renzo is, according to ESGFIRE, the best positioned player in the market to take advantage of this growth in non-electrification renewable areas due to its history and deep know-how in the sector. More and more automakers are betting on vehicles powered by other renewable energy sources in addition to electricity. For example, Toyota and Hyundai, which are making major investments in the field. Another example is Renault in Colombia, which has replaced its entire production line with now running on natural gas. So far, only Colombia has converted over 10,000 vehicles without any problems with current vehicle warranties. Renault says drivers save 25-35% in fuel costs thanks to the conversion.

Emerging countries that do not have an expanded functioning electricity grid will probably become a large market for Landi Renzo in the future as it is relatively easy to rebuild existing gasoline / diesel vehicles to be able to run on Hydrogen, biogas and other renewable fuels. In China, for example, sales of vehicles that run on hydrogen via fuel cells grew by 300% in 2022. The advantages are many, for example, the range of some vehicles is 800 kilometers on a tank with fuel cells that run on hydrogen.

However, most hydrogen produced today is unfortunately not green, but after the EU in February 2023 now decided that hydrogen produced with the help of nuclear power should be classified as green energy, which really paves the way for vehicles that run on hydrogen in the future.

There are probably large hidden values in a possible separate listing of the subsidiary SAFE & CEC on NASDAQ in the US, which, according to our calculations, could add value of € 86-129 million EUR either in the form of cash or in the form of an value-added securities holding. Safe & CEC currently has revenues of around €86 million EUR  annually, if we apply the same valuation as Clean Energy Fuels , which is an equivalent peer, then with an EV / Sales multiple of 3.3 we have a separate market capitalization around €285 million EUR  for Safe & CEC, of which 51% of this company is currently owned by Landi Renzo. This possible separate listing individually could therefore mean a possible justified price increase of Landi Renzo of 70-100% against today's share price.

Financial structure / History

Thanks to a recent rights issue of EUR 57 million, Landi Renzo is very well capitalized and there should therefore be no risk of a new share issue in the foreseeable future.

The company has recently carried out a consolidation in which it incorporated the companies Metatron (acquisition in hydrogen) and their joint venture in the US that is partly owned (51%) together with the, for ESG investors, perhaps better known company Clean Energy Fuels (listed on Nasdaq). The joint venture company SAFE & CEC is of particular interest as this subsidiary is the world leader in compressor systems for hydrogen and supplies components / infrastructure for renewable fuels such as CNG, hydrogen and RNG (renewable natural gas) globally. This is an apparent assessment as the subsidiary has cooperation with publicly listed Clean Energy Fuels Landi Renzo also has an ongoing project for a hydrogen-powered combustion engine.

Conclusions and investment cases

Landi Renzo emerges not just as an investment opportunity but as a beacon of sustainable innovation in the automotive industry. For investors committed to ESG principles and seeking growth in the green revolution, Landi Renzo stands as an intriguing prospect, bridging the gap between returns and environmental consciousness.

Landi Renzo has many incredibly strong macro trends that suggest that the company is going to meet a bright future. For the global green transition that is currently underway, Landi Renzo's expertise in renewable fuels will be invaluable. The company is currently valued at  8 X EV/EBITDA for 2024 and 5,25 X EV / EBITDA for 2025.  Competitor Westport Fuel Systems, which for 2023 is trading at negative EV / EBITDA for 2024 and 8,2 for 2025. Landi Renzo also has solid technical expertise and is sitting on very large hidden values through its subsidiary SAFE & CEC, which only in itself through a separate listing could generate a return of 65-100%. At the same time, the fall height in the current share price is relatively low thanks to the recently completed new share issue of EUR 57 million.  In conclusion, Landi Renzo transcends the label of a conventional investment opportunity. It emerges as a cornerstone in the convergence of financial growth and environmental responsibility. For investors aligned with ESG principles and envisioning a future where sustainable practices drive profitability, Landi Renzo stands as a compelling choice—a journey towards not just financial gains but a greener, more sustainable tomorrow. Overall, ESGFIRE sees a good risk/reward in the Landi Renzo investment case.

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ESGFIRE is an investment company and research firm that focuses on ESG companies with either an environmentally friendly service or product. ESGFIRE has a performance record of over 1000 % returns since 2018.

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