Invest Securities
16 octobre 2015
DRONE VOLT (+)
A pure player in a sector that is taking off
Initiation of coverage
Opinion
BUY
Target price
€14,5
Upside
+37%
€ / share
Diluted EPS
var. 1 an
Changes
2014
0,04
+182,0%
n.s.
2015e
-0,46
n.s
n.s.
2016e
0,02
n.s
n.s.
2017e
0,45
n.s.
n.s.
FR0012649184
MLDRV-FR
ISIN
Ticker
Secteur DJ
€10,6
1,1
1,1
11,9
2,8
Price
Nb shares (m)
Nb shares FD (m)
Capitalization (€m)
Free float (€m)
1m
-7,7%
-2,9%
Change
Relative change
3m
n.s
n.s.
1 an
n.s.
n.s.
20
15
The drone era is only just beginning. While the technology comes from the military for
surveillance and air strikes, the civil applications are far from being totally identified, One
thing is certain: all observers appear to agree that this market will show strong growth
over the coming years. Drone Volt has been a pure player in this sector since 2012 and
was one of the first companies to particularly target professional users. Our valuation is
based on a DCF approach in which the key parameter is the management of the
company’s hyper-growth (WCR and rising margins). With a normalised operating margin
of 15% and a WCR stable at 20% of revenues, our target price equals €14.5/share (+37%).
We are initiating coverage of Drone Volt with a BUY rating.
● There is great interest in drones when it is a question of replacing people in repetitive or
dangerous tasks. Much less expensive than an airplane or helicopter, a drone is agile,
simple to use and discrete. The French civil drone professional federation (FPDC)
estimates that there are over 200 possible applications: energy, transportation,
construction, agriculture etc.
● The market for drones for military use currently represents virtually the entire world
market. According to a report published by the US research firm Teal Group, a specialist
in the aerospace and defence market, drones for civil use represent only 11% of the
total market. Regardless of the source, the consensus is calling for strong growth on this
market over the coming years. On the level of the French market, the Xerfi research
group evaluated this market at €100m in 2013, with a forecast for €288m in 2015 and
average annual growth in revenues for manufacturers and operators of civil drones of
+70% between 2012 and 2015.
● Drone Volt is a start-up based in Villepinte, near the Roissy-Charles-de-Gaulle airport.
The company, which was founded by Dimitri Batsis, specialises in the design, assembly
and distribution of drones, principally aerial. Its products target a broad range of
markets and customers ranging from mass market to professional uses and its strategy
focuses on professional customers.
10
5
0
avr.-15
juin-15
Drone Volt
31/12
PE
EV/CA
EV/EBITDA
EV/EBITA
FCF yield*
Rendement
ND/EBITDA
2014
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
0,0x
août-15
Drone Volt vs CAC mid & small
2015e
n.s.
3,48x
n.s.
n.s.
-4,1%
0,0%
-2,3x
* Operating taxed FCF before WRC / EV
Laurent Wilk
+33 (0) 1 44 88 77 97
lwilk@invest-securities.com
2016e
n.s.
1,86x
111,0x
547,3x
0,1%
0,0%
13,1x
2017e
23,5x
1,21x
15,3x
17,7x
3,9%
0,0%
1,9x
● Since 2012, the company has gradually repositioned its offer in favour of the
professional market, which is more lucrative and offers better opportunities. This
segment should represent €2,2m in revenues in 2015 (60% of total revenues) and show
the strongest growth (+180%). The largest end market at present is the media sector
(television channels in particular), which uses drones to obtain images that were
previously impossible to obtain (with helicopters being too expensive or with limited or
overly restricted flyover zones). Drone Volt supplies the principal French television
channels, a market that is developing rapidly.
● We anticipate a 2014/2019 CAGR in revenues of 66% on a constant perimeter basis. As
the company’s strategy is to focus on professional customers, which offer the highest
margins, we estimate that the gross margin should ultimately reach 35% (vs. 29% in
2014). Drone Volt is effectively providing increasing amounts of added value by
“customising” its drones to adapt them to particularly activities (for example, the Drone
Spray for cleaning roofs).
● Our valuation is based on a DCF approach with the management of the WCR and rising
margins as the key parameters. With a normalised operating margin of 15%, a WCR
stable at 20% of revenues and a discount rate of 11.5%, our target price equals
€14.5/share (+37%). We are initiating coverage of Drone Volt with a BUY rating.
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
REPRODUCTION INTERDITE SAUF AUTORISATION
Invest Securities, 73 boulevard Haussmann 75008 PARIS, France
Tel : + 33 (0) 1 44 88 77 88
1
Invest Securities
16 octobre 2015
Données financières
Shareholders
M. Dimitri Batsis
Administrateurs
68,6%
7,5%
Free float
23,9%
Free fl oat
23,9%
Admi nistrateurs
7,5%
Next event
12/10/2015
M. Di mitri Batsis
68,6%
CA T3 2015
Per share
BNA publié
BNA corrigé dilué
Ecart /consensus
Actif Net
Dividende
2011
n.s.
n.s.
n.s.
n.s.
n.s.
2012
n.s.
n.s.
n.s.
n.s.
n.s.
2013
0,02
0,02
n.s.
0,16
0,00
2014
0,04
0,04
n.s.
0,20
0,00
2015e
-0,46
-0,46
n.s.
0,00
0,00
2016e
0,02
0,02
n.s.
0,02
0,00
2017e
0,45
0,45
n.s.
0,47
0,00
2018e
1,11
1,11
n.s.
1,58
0,00
2019e
1,82
1,82
n.s.
3,39
0,00
Valuation ratios
P/E
VE/CA
VE/EBITDA
VE/EBITA ajusté
FCF yield op. avt BFR
FCF yield opérationnel
Yield
2011
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2012
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2013
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2014
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2015e
n.s.
3,48x
n.s.
n.s.
-0,04x
-0,08x
0,00x
2016e
n.s.
1,86x
111,0x
547,3x
0,1%
-5,0%
0,0%
2017e
23,5x
1,21x
15,3x
17,7x
3,9%
-1,5%
0,0%
2018e
9,6x
0,81x
6,4x
6,9x
10,1%
2,6%
0,0%
2019e
5,8x
0,55x
3,6x
3,8x
18,4%
9,0%
0,0%
Entreprise Value (€m)
Price in €
Capitalization
Net debt
Value of minority interests
Provisions/ debts & equival.
+/-corrections
Enterprise value (€m)
2011
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2012
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2013
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2014
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2015e
10,6
12
1,0
0,0
0,0
0,0
13
2016e
10,6
11,9
1,6
0,0
0,0
0,0
13,4
2017e
10,6
11,9
1,7
0,0
0,0
0,0
13,5
2018e
10,6
11,9
1,2
0,0
0,0
0,1
13,1
2019e
10,6
11,9
-0,1
0,0
0,0
0,2
12,0
Profit & Loss (€m)
Sales
var.
EBITDA
Adjusted EBITA
var.
EBIT
Financial result
Taxes
Equity acc. Comp. & min. int.
Declared net earnings
Adjusted net earnings
var.
2011
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2012
1
n.s.
0
0
n.s.
0
0
0
0
0
0
n.s.
2013
1
+49,6%
0
0
n.s.
0
0
0
0
0
0
n.s.
2014
1,7
0,4
0,0
0,0
0,4
0,0
0,0
0,0
0,0
0,0
0,0
0,8
2015e
3,7
115%
-0,4
-0,5
n.s.
-0,5
0,0
0,0
0,0
-0,5
-0,5
n.s.
2016e
7,2
96%
0,1
0,0
n.s.
0,0
0,0
0,0
0,0
0,0
0,0
n.s.
2017e
11,2
56%
0,9
0,8
n.s.
0,8
0,0
-0,2
0,0
0,5
0,5
2003%
2018e
16,2
45%
2,1
1,9
n.s.
1,9
0,0
-0,6
-0,1
1,2
1,2
145%
2019e
21,9
35%
3,4
3,2
66%
3,2
0,0
-1,1
-0,1
2,0
2,0
64%
Cash flow statement (€m)
EBITDA
Theorical taxes/EBITA
Capital expenditure
Op. FCF before WRC
Change in WCR
Operational CF
Acquisitions/sales
Change in capital
Dividends
Others
Declared FCF
2011
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2012
0
0
0
0
0
0
0
0
0
0
0
2013
0
0
0
0
0
0
0
0
0
0
0
2014
0,0
0,0
-0,1
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
2015e
-0,4
0,2
-0,3
-0,5
-0,6
-1,1
0,0
0,3
0,0
0,0
-0,8
2016e
0,1
0,0
-0,1
0,0
-0,7
-0,7
0,0
0,0
0,0
0,0
-0,7
2017e
0,9
-0,3
-0,1
0,5
-0,7
-0,2
0,0
0,0
0,0
0,0
-0,2
2018e
2,1
-0,6
-0,1
1,3
-1,0
0,3
0,0
0,0
0,0
0,0
0,3
2019e
3,4
-1,1
-0,1
2,2
-1,1
1,1
0,0
0,0
0,0
0,0
1,1
Assets (€m)
Non current assets
incl. intangibles/GW
WRC
Shareholder's equity
Minority interests
Provisions
Net debt
2011
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2012
0
0
0
0
0
0
0
2013
0
0
0
0
0
0
0
2014
0,1
0,0
0,2
0,2
0,0
0,0
0,0
2015e
0,3
0,0
0,7
0,0
0,0
0,0
1,0
2016e
0,4
0,0
1,4
0,0
0,0
0,0
1,6
2017e
0,4
0,0
2,1
0,5
0,0
0,0
1,7
2018e
0,4
0,0
3,1
1,8
0,0
0,0
1,2
2019e
0,3
0,0
4,3
3,8
0,0
0,0
-0,1
Financial ratios (%)
EBITDA/Sales
EBITA/Sales
Adj.net earnings /Sales
WCR/Sales
ROCE excl. Intangibles/GW
Adjusted ROE
ND/Shareholder's equity
ND/EBITDA (in x)
2011
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
2012
9,2%
8,9%
7,4%
16,3%
53,2%
n.s.
n.s.
-0,4x
2013
2,6%
2,4%
2,0%
16,0%
14,6%
n.s.
n.s.
-0,6x
2014
2,7%
2,4%
2,6%
10,9%
18,4%
n.s.
n.s.
0,0x
2015e
-11,5%
-13,6%
-13,9%
20,1%
-48,8%
n.s.
n.s.
-2,3x
2016e
1,7%
0,3%
0,3%
19,7%
1,4%
n.s.
n.s.
13,1x
2017e
7,9%
6,8%
4,5%
19,2%
30,0%
n.s.
n.s.
1,9x
2018e
12,7%
11,8%
7,6%
19,4%
54,6%
n.s.
n.s.
0,6x
2019e
15,4%
14,5%
9,3%
19,5%
70,3%
n.s.
n.s.
0,0x
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
REPRODUCTION INTERDITE SAUF AUTORISATION
Invest Securities, 73 boulevard Haussmann 75008 PARIS, France
Tel : + 33 (0) 1 44 88 77 88
2
Invest Securities
16 octobre 2015
Index
1 – The emergence of drones: a revolution underway
p.5
1.1 The military origins of drones
p.5
1.2 Rotary wing vs. fixed wing drones
p.6
1.3 Drone cans have over 200 applications
p.7
1.4 The development of the industry is being shaped by regulations
p.8
1.5 Algorithms as sources of differentiation and value creation
p.9
2 – A $4.8bn market looking out to 2021
p.11
2.1 Manufacturers represent nearly 90% of the drone market
p.11
2.2 Principal manufacturers: a Chinese giant and local leaders
p.13
2.3 Benchmark specialists in each segment
p.13
2.4 The media market: the principal end market for drones
p.14
3 – Drone Volt covers 80% of the media market in France
p.16
3.1 A serial entrepreneur at the origin of Drone Volt
p.17
3.2 Drone Volt has the qualities of a generalist and the advantages of a specialist
p.17
3.3 R&D and international expansion should transform Drone Volt into a manufacturer
p.20
4 – Strategy and valuation: hyper-growth to manage
p.22
4.1 Revenues: forecast 2014/19 CAGR of +66%
p.23
4.2 Widening gap between professional and mass market gross margins
p.24
4.3 Hyper-growth and structuring
p.25
4.4 Profitability that should accelerate starting in 2017
p.27
4.5 WCR: the factor limiting growth
p.27
4.6 Still weak cash generation
p.28
4.7 Valuation: a DCF valuation is the only pertinent approach
p.29
Disclaimer
p.33
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
REPRODUCTION INTERDITE SAUF AUTORISATION
Invest Securities, 73 boulevard Haussmann 75008 PARIS, France
Tel : + 33 (0) 1 44 88 77 88
3
Invest Securities
16 octobre 2015
1 – The emergence of drones: a revolution underway
1.1 The military origins of drones
p.5
1.2 Rotary wing vs. fixed wing drones
p.6
1.3 Drone cans have over 200 applications
p.7
1.4 The development of the industry is being shaped by regulations
p.8
1.5 Algorithms as sources of differentiation and value creation
p.9
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
REPRODUCTION INTERDITE SAUF AUTORISATION
Invest Securities, 73 boulevard Haussmann 75008 PARIS, France
Tel : + 33 (0) 1 44 88 77 88
4
Invest Securities
16 octobre 2015
1 – The emergence of drones: a revolution underway
Drone Volt is a start-up based in Villepinte, near the Roissy-Charles-de-Gaulle airport. The
company, founded by Dimitri Batsis, specialises in the design, assembly and distribution of
drones, principally aerial. Its products target a broad range of markets and customers ranging
from mass market to professional uses and its strategy focuses on professional customers.
1.1 The military origins of drones
A technology issued
from the military
sector…
Drones first appeared at the beginning of the last century and were then used in the military area
for a very extended period. Nevertheless, while military drones are derived from aviation, civil
drones are derived from miniaturisation. Thanks to microelectromechanical systems (MEMS),
sensors already present in smartphones, the size of drones has shrunk at the same time that their
prices have fallen steeply.
History of drone technology
•
200 BC
1849
1914-1918
1918
1923
1935
1934-1938
The Han dynasty emperors reportedly used kites for military purposes in
frighten their enemies or calculate the length of tunnels in order to bese
cities.
• The Austrians arm unmanned balloons with explosives in order to bomba
Venice.
• First attempts to developed radio-commanded unmanned airplane proto
•
•
•
•
•
1944
…that is not as recent as
could be thought!
1946
1964-1975
1973
1990
2003
2006
2008
2012
2013
•
•
•
•
•
•
•
•
•
Georges Clémenceau, president of the French Senate’s armed forces
commission, launches the unmanned aircraft project.
First French unmanned aircraft designed by the engineer Maurice Perche
the army captain Max Boucher. Not adopted by the army.
First use of the word “drone” (the name of the male bee) in the UK in ref
to these aircraft’s slow and noisy flight
Development of drone prototypes in the UK and the United States for us
targets, notably in pilot training
Launch by Nazi Germany of the V1 rocket (a flying bomb and at the same
the first cruise missile in the history of aeronautics). Used during World W
Germany against the UK from 13 June 1944 to 29 March 1945. The V1 wa
replaced by the V2.
Use of unmanned aircraft by the United States to study the radioactive c
above Bikini atoll.
Massive use of drones during the Vietnam War: nearly 35,000 reconnaiss
leaflet dropping missions by the Americans.
Scout programme in Israel leading to the creation of the first modern dro
equipped with a camera.
First use of armed drones by Iran during its war with Iraq
Transatlantic flight of a Global Hawk Hale (high altitude) between Califor
northern Germany
In the United States, the National Oceanic and Atmospheric Administrati
a drone-sensor as a hurricane hunter.
The French police receive an Elsa drone to monitor demonstrations.
The French transportation ministry regulates the use of drones in French
airspace.
The FBI admits using surveillance drones in the United States.
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
REPRODUCTION INTERDITE SAUF AUTORISATION
Invest Securities, 73 boulevard Haussmann 75008 PARIS, France
Tel : + 33 (0) 1 44 88 77 88
5
Invest Securities
16 octobre 2015
1 – The emergence of drones: a revolution underway
1.2 Rotary wing vs. fixed wing drones
A drone, also referred to as an UAV (Unmanned Aerial Vehicle) or RPAS (Remotely Piloted Aircraft
System), is a remote controlled or autonomous unmanned aircraft that can potentially carry a load
that can be used in missions. For the most sophisticated drones, the autopilot assures the
navigation. On the ground, the human remote pilot (connected by radio) only has to indicate the
coordinates to be reached or the flightpath to follow.
Different types of drones…
There are several families of drones with highly different forms: fixed wing drones that can fly
several tens of kilometres and rotary wing drones (helicopters, multi-rotors) that allow stationary
flight.
Suitabilty for uses
Drone system
Ground stations
& pilots
Sensors and
equipment
Vectors
Rotary wing drones
… for different uses
Professional ground
segment
Cameras
-
Lasers
-
Infrared
-
Magnetometers
-
Ultrasound sensors
-
Gyroscope
-
Spreading systems
-
Etc…
Leisure
Aerial photography
-
Stationary flight capacity
-
-
Discretion
-
-
Agility
Inspection in confined
structures
-
Low sensitive to wind
-
Payload capacity
-
Inspection of civil engineering
structures
-
Agriculture / Spreading
-
Overflight of transportation or
energy networks
-
Scientific research
-
Precision agriculture
-
Cartography, topography
-
Industrial measurements
Smartphone
-
-
Fixed wing drones
-
Range of action
(autonomy and altitude)
-
Very low sensitive to wind
Source : Mirova, Redbird
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
REPRODUCTION INTERDITE SAUF AUTORISATION
Invest Securities, 73 boulevard Haussmann 75008 PARIS, France
Tel : + 33 (0) 1 44 88 77 88
6
Invest Securities
16 octobre 2015
1 – The emergence of drones: a revolution underway
1.3 Drone cans have over 200 applications
Drones are highly sought out when it is a question of replacing people in repetitive or dangerous
task. Much less expensive than an airplane or a helicopter, drones are agile, easy to use and
discrete. The French civil drone professional federation (FPDC) estimates that there are over 200
possible applications: energy, transportation, construction, agriculture etc. We will detail here
the five areas in which the use of drones is becoming increasingly essential.
Five major areas of
applications at present
The first area to be transformed was the media sector, where professionals are the principal users.
Drones have already colonised television, where they are essentially when “beauty shots” (the
trademarks of French televised travel magazines such as “Des racines & des ailes” and “Thalassa”)
are desired. The movie industry is also an eager user of this technology. In effect, the Hollywood
studies were the first players to receive Federal Aviation Agency (FAA) flight approvals in 2014.
Drones can substantially change in manner in which movies are made by enabling the camera to
turn around the actors during long sequences, something that would be impossible to do using
traditional methods.
The inspection of infrastructures is another activity being developed. Drones can be used to inspect
buildings or civil engineering structures (such as the Millau viaduct, for example). Thanks to
sophisticated software, it is possible to reconstitute maps in three dimensions, thereby making it
possible to visualise defects and best prepare repair work. The advantage also involves assuring the
safety of workers, particularly those working with harnesses or work platforms.
Precision agriculture is a segment offering strong growth potential for civil drone manufacturers.
Through the use of sensors and specialised software, drones are able to detect diseased or
hydraulically stressed parcels. In this manner, drones participate in the development of sustainable
precision agriculture featuring the reduced use of pesticides and controlled irrigation.
Finally, drones are used in the civil protection and surveillance area, particularly in countries
outside of France where airspace regulations are less restrictive. At an altitude of 250 meters, the
drone is inaudible while at the same time enabling the obtaining of excellent images with powerful
zoom lenses. A cautious attitude has been adopted in Western Europe, even if the majority of
police forces are already conducting tests and are examining how to integrate drones into their
panoply of equipment. For the last several years, the French state railway company SNCF has
innovated in the drone area in order to improve the performance and security of its network. This
process has taken off thanks to the partnership signed on 24 February 2015 with the French
aerospace research centre ONERA with the objective of developing customised drone technologies
for the specific applications of the SNCF.
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
REPRODUCTION INTERDITE SAUF AUTORISATION
Invest Securities, 73 boulevard Haussmann 75008 PARIS, France
Tel : + 33 (0) 1 44 88 77 88
7
Invest Securities
16 octobre 2015
1 – The emergence of drones: a revolution underway
1.4 The development of the industry is being shaped by regulations
One of the catalysts in the drone industry has been regulation and/or its absence. Given the legal
vacuum in numerous countries, the development of the drone industry was slowed, as operators
could not rely on clear rules. This caused difficulties in terms of insurance or quite simply the
banning of drones. In the United States, there were no regulations on the federal level for a long
period, thereby opening the way to local experiments, prior to the adopting of strict rules by the
FAA at the beginning of 2015.
Regulations: a strategic
challenge
Europe is the most advanced region in terms of regulations governing the use of civil drones.
However, these regulations are very recent and vary in terms of their content. Regulations notably
differ in terms of three key points: (i) the weight and technical characteristics of the different
categories of drones, (ii) the necessity or not of certification of drones and (iii) the possibility or not
of using drones in flights outside the field of vision of the remote pilot or in automatic mode. The
European authorities are seeking to harmonise the principal terms of regulations relating to the use
of drones in EU member states in 2015. Such a decision would enable accelerated development of
the industry in Europe.
In contrast, France has been a pioneer here with the development by the DGAC (French civil
aviation authority) of a legal framework governing the use of aerial drones as of April 2012. The
regulations are very strict in terms of the registration and certification required from drone
designers, operators and pilots. The regulations also specify the conditions that must be met in
order to obtain flight authorisations. This legal framework is rigorous but establishes the grounds
for real business opportunities for industry players.
The key points of the regulations in effect in France are the following:

Manufacturers much obtain a design attestation from the DGAC that notably specifies the
category of aircraft, the nature of the activity being considered and the mission scenario.

Operators (professionals using drones for commercial purposes) must be included on a list
established by the DGAC that notably mentions the nature of the activity, the mission
scenario, the manufacturer and the model of the aircraft to be used.

Remote pilots must have a pilots licence (theoretical training) and a declaration of their level
of competence.

Flight authorisations require the prior filing with the regional civil aviation security agencies
(prefectures) of the specific activities manual.
France: a pioneer in the
area
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1 – The emergence of drones: a revolution underway
1.5 Algorithms as sources of differentiation and value creation
The development of algorithms and onboard software for drones provides solutions for the
different questions raised by their use (safety, respect of privacy etc.).
At the heart of the system are found the aircraft’s core programmes that assure the essential
functions of the drone. This is the role of the electronic board, particularly the flight controller,
which assures different functions:
The electronic board and
the core programmes, a
rather closed system…

reading the flight instructions transmitted by the radio receptor

reading the data from detectors that indicated the rotation and lateral displacement of the
drone in three dimension: gyroscope, accelerometer

combining these two groups of data in order to determine speed corrections for each motor
while taking into account the speed of reaction instructions chosen by the pilot

sending speed commands to the motor controls (around 200 times per second)
Among the market leaders, we find the Naza by DJI. Several manufacturers have adopted the APM,
a flight controller based on a Arduino system and Open Source software. This is the case for the
Chinese company Walkera and the US company 3D Robotics. Small competition drones are often
guided by a MultiWii flight controller (a successful combination of the Wii Motion Plus by Nintendo
and Arduino) or the CC3D, which is based on open source firmware called OpenPilot.
With top of the line controllers, it is possible to adjust setting using a PC et Mac, or even a
smartphone with a Bluetooth chip. These options are nevertheless complex and relatively
inaccessible to inexperienced users.
Outside of this system, programming platforms (Software Development Kits or SDK) are open to
developers. The principal platforms are Pix4D and Agisoft. These programmes allow the processing
of videos and photographs for different uses, including the production of 3D maps from simple
photographs.
…completed by a
programmable layer
These software programmes make drones particularly attractive and innovative for numerous
professionals. In effect, whether it involves movies or video games, it is now possible to reproduce
in an identical and virtual manner any map, relief or building starting with a simple drone equipped
with a camera.
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1.1 Manufacturers represent nearly 90% of the drone market
p.11
2.2 Principal manufacturers: a Chinese giant and local leaders
p.13
2.3 Benchmark specialists in each segment
p.13
2.4 The media market: the principal end market for drones
p.14
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2.1 Manufacturers represent nearly 90% of the drone market
A market dominated by
the manufacturers …
The military drone market by itself represents nearly the entire drone market worldwide.
According to a study by the US research firm Teal Group, a specialist in aerospace and defence
market, civil drones represent only 11% of the total market. Teal Group is forecasting that the
total market (military and civil) will reach $11.5bn by 2024.
The civil drones market should represent 14% of the market in 2024, corresponding to $1.61bn.
The US research firm Lux Research evaluates this market at $1.7bn by 2025, while RadianInsights
is forecasting $4.8bn in 2021 (versus $609m in 2014). Additionally, Teal Group estimates that
total R&D spending on drones should reach $9.1bn over 2015-2024. Regardless of the source, the
overall consensus is calling for strong growth over the coming years. On the level of the French
market, the Xerfi research group evaluated this market at €100m in 2013 with a forecast for
€288m in 2015, including average annual growth in revenues of civil drone manufacturers and
operators of +70% between 2012 and 2015.
Looking beyond the manufacturers, the drone market can be divided into five business categories:
 The assemblers, which purchase and design components and assemble them to create
operational drone platforms
 The distributors, which generally target the mass market
 The operators, who pilot drones under specific conditions and for specific uses
 The trainers or trading centres, which provide training and certifications for pilots seeking to
pilot drones in one of the four frameworks defined by the DGAC (French civil aviation authority)
 The programmers of piloting software, onboard software or mobile applications
These business segments require different skills: mechanics, electronics, aeronautics, IT,
topography, thermography, photography etc.
…in value terms, but not
in number!
As of March 2015, 50 drone manufacturers and around 1,300 providers of drones services were
registered by the DGAC in France. As of January 2014, Xerfi counted a total of 461 companies
operating on the civil drone market, including 29 manufacturers and 432 operators (count based on
the DGAC registry). In 2012, the manufacturers, which often offer operating services, represented
88.7% of the market and 11.7% of operators. The civil drone market is therefore dominated by the
manufacturers and leisure drones. In terms of manufacturers, the market is dominated by the
Chinese company DJI and the French company Parrot.
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Number of civil drone operators in France
500
432
400
301
284
300
189
200
127
100
0
janv.-13
avr.-13
juil.-13
oct.-13
janv.-14
Source : DGAC/Xerfi
The number of drone operators in France rose 240% in 2013. There is a very wide range of drone
applications that are revolutionising numerous activities. Supply is still very limited compared to the
potential market, thereby leaving to door open to numerous entrepreneurs.
Number of operators on the five principal end markets on the drone market
Loisir
6
Sécurité civile
12
Science de la terre
17
Surveillance & inspection
47
Information & média
83
0
10
20
30
40
50
60
70
80
90
Source : DGAC/Xerfi
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2.2 Principal manufacturers: a Chinese giant and local leaders
A world leader: the
Chinese manufacturer
DJI…
Founded in 2006 by Frank Wang, the Chinese company DJI (based in Hong Kong) is the world leader
in drones for civil uses. The company is in the process of doubling its sales to $1bn in 2015. DJI sold
400,000 drones in 2014 at prices starting at $859. Well known for its very popular Phantom model,
DJI is very popular with photographers and filmmakers. However, the company plans to move
beyond the status as a “simple” drone manufacturer by proposing a veritable platform (software
and equipment). DJI consequently began to offer development kit in connection with the
commercialisation of its latest drone, the Inspire One, in November 2014. The majority of French
assemblers / manufacturers limit themselves to “customising” DJI aircraft for their own needs. After
having raised €75m from the Accel Partners fund in May 2015, DJI stands out as the largest
manufacturer of drones in the world. According to certain sources, DJI recorded $500m in sales in
2014 compared to $50m for 3D Robotics.
3D Robotics reinforced its balance sheet last February through a $50m fund raising round involving
a much smaller valuation. 3D Robotics was founded by Colin Guinn, the former head of DJI’s
operations in the United States, and is the largest manufacturer of mass market drones in the
United States. The company is being supported financially by Qualcomm and Sandisk. The Sequoia
investment fund also invested $30m in 2014, valuing the company at $1.6bn. 3D Robotics has
created an open source OS in order to attract programmers interested in its less expensive drones.
Parrot is the world leader in drones for recreational uses. Founded by Henri Seydoux in 1994,
Parrot designs, develops and commercialises mass market and high technology products for
smartphones and tablets. Parrot offers the widest range of hands-free communication systems for
automobiles and its universally recognised expertise in mobile connectivity and multi-media
features for smartphones is positioning the company to become a key player in in-vehicle
infotainment. Parrot’s drone sales exploded in Q1 2015 by +356% and segment sales in 2015 could
reach €180m, corresponding to over half of the company’s total sales.
2.3 Benchmark specialists in each segment
While the major manufacturers are dominating the drone market, numerous small and mid-sized
companies have adapted drone technology to highly specific business segments. In France, certain
players are beginning to be recognised as drone manufacturers and / operators on specific market
segments. We can cite for example:
 Red Bird, operator of civil drones, leader in industrial and agricultural applications
…but players
specialising in market
segments
 Fly-n-Sense, a manufacturer specialising in assistance for fire fighters with its “Staff” solution,
which allows the management and monitoring of changes in the flame front and thereby allows
more efficient targeting of the zones to be addressed in priority and reinforced security in case
of a risk of encirclement
 Dronea, drone operator drones, leader in construction site monitoring
 Novadem, specialist in the design, development and sale of drones for civil and military
applications in the agriculture, inspection of civil engineering structures and crisis management.
The group stands out notably through its in-house developed LPS (Local Positioning System)
technology. This system allows the totally automated inspection of civil engineering structures
without GPS, a first worldwide.
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 Squadrone, a Grenoble-based start-up specialising in extreme sports that is working on a Hexo+
drone model designed to be able to film sporting performances with total autonomy. The Hexo+
drone is open for pre-orders over the Internet (hexoplus.com) and delivery is expected before
the end of 2015. We would note here the Lily drone, a competitor of the Hexo+ that has been
developed in a laboratory at the University of California - Berkeley. It can be pre-ordered over
the Internet (www.lily.camera) with delivery expected in February 2016. This drone can follow
the path of the athlete, avoid obstacles and film with a 360° view.
In order to establish a presence on the drone market, it is therefore necessary to be an all-around
generalist or a specialist with a leading position on a niche market. In this regard, Drone Volt is a
leader on the media market in France.
2.4 The media market: the principal end market for drones
Drones are being increasingly used by audio-visual companies. This segment is additionally the most
developed among professional applications, representing over 80% over specialist revenues in 2013
(excluding leisure applications).
The use of drones to take pictures or make videos for professional purposes is notably based on
two decisive advantages: the ability to take aerial shots between 10 and 150 meters above ground
at a much lower cost than a helicopters for comparable missions (at least two times less expensive
for a drone and its remote pilot). Drones are beginning to be used on several markets:
 Sporting events. The advantages of drones compared to helicopters in terms of costs but also in
terms of possibilities and ease of use very quickly led to this market being opened up to
manufacturers and operators. For example, drones were used in connection with the Tour de
France and the Sochi Olympic Games in February 2014.
 Documentary films and news reports. While still little used in movies, drones have proved to be
highly valuable tools in the shooting of documentary films and news reports concerning nature
or heritage sites.
The media market, a
precursor …
 News media. The first use of a drone by the news media in France was made by BFM TV in June
2013 to cover flooding in southwestern France. Due to the strict regulations (limitations on
flights above inhabited zones), drones are still principally used to cover weather events. Highly
used hostile environments (war zones, for example), drones can be powerful allies for the
protection of journalists. Similarly, they can make information less subjective thanks to wider
angle views.
 Real estate and tourism agencies. Real estate agencies are beginning to use drones to highlight
the advantages of beautiful villas with aerial photographs and even virtual visits. Campgrounds
and hotels are also looking into the use of drones.
The majority of French medias currently using drones work with outside service providers such as
Flying Eye and Drone RC, along the lines of France Television and BFM TV. Nevertheless, this
situation could change very rapidly. For example, TF1 and i-Tele launched a drone training
programme for their journalists at the beginning of 2014.
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The media sector is showing steady growth. Drone Volt is directly benefiting from this, as this sector
is its leading end market.
Total bids for documentary audio-visual production in France (€m)
500
437,9
400
320
395,4
388,1
2010
2011
345
300
200
100
2008
2009
2012
Source: Xerfi / CNC
…hungry for new
technologies
Total bids for documentary audio-visual production in France rose by +8.2% per year between 2008
and 2012. These figures reflect the growth in investments in the audio-visual sector, where players
are highly attuned to the use of new technologies, thereby represent a highly promising source of
business for Drone Volt.
According to the Lucintel research group, the film and amusement market should reach $139bn by
2017, with average annual growth of 4.2% / year.
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3 – Drone Volt covers 80% of the media market in France
3.1 A serial entrepreneur at the origin of Drone Volt
p.17
3.2 Drone Volt has the qualities of a generalist and the advantages of a specialist
p.17
3.2.1 Drone Volt began as a mass market distributor – assembler
p.17
3.2.2 Drone Volt includes three types of services with its equipment sales
p.18
3.2.3 The offer is increasingly focusing on media professionals
p.18
3.2.4 Drone Volt works with the four principal international suppliers
p.19
3.2.5 Drones sold for an average price of €10,000
p.19
3.3 R&D and international expansion should transform Drone Volt into a manufacturer
p.20
3.3.1 An increase in the workforce to accompany the sales team
p.20
3.3.2 An increase in investments to develop the R&D
p.20
3.3.3 International expansion: a first subsidiary in Denmark
p.20
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3.1 A serial entrepreneur at the origin of Drone Volt
Experienced management
Drone Volt was founded by Dimitri Batsis, a successful serial entrepreneur who started in business
in 1987 with the creation of a Minitel company. A few years later, this company was transformed
into a web agency specialising in the development and hosting of Internet sites, with an initial data
centre in Chantilly. Listed on the Free Market in 2000, the company was ranked no. 24 among the
900,000 companies included in the Coface/Figaro ranking of companies with the best balance
sheets. This company was sold to Keyrus (Eric Coen) a few years later. In 2012, Dimitri Batsis
purchased a stake in FPV Forever, a website dedicated to leisure drones created in 2011. He first
owned 50% of the company before buying out the remaining 50% in Octobers 2013 in order to shift
the company’s strategy in favour of the more profitable professional market.
Beyond its chairman / CEO, Drone Volt’s management committee includes Jérôme Marsac, a
consultant in development and equity financing and the entrepreneur at the origin of Cybergun.
The company has developed very rapidly through organic growth, with revenues rising from €145k
in 2011 to €820k in 2012 (+465%), €1.222m in 2013 (+49%) and €1.712m in 2014 (+40%).
3.2 Drone Volt has the qualities of a generalist and the advantages of a specialist
3.2.1 Drone Volt began as a mass market distributor – assembler
Drone Volt exclusively sells professional or semi-professional products through both B2C and B2B.
The company does not sell toy drones, which are sold by hobby shops and mass market retailers.
Drone Volt assembles and distributes drone parts and systems coming from other industrials such
as the Chinese company DJI. These products were initially destined for the mass market and target
a small percentage of knowledgeable consumers who purchase separate parts in order to build
their own systems. Sales to retail customers are made through the company’s website
(www.fpv4ever.com).
From the mass market
…to professionals
This segment continues to contribute to the company’s business, However, it is not a priority in
terms of revenue growth and the group expects that it will remain constant compared to its other
activities.
Drone Volt’s strategy is to develop the professional market, where the growth rate is estimated at
+180% in 2015. Sales to professionals are made essentially through the showroom located in the
Paris region or through contacts with the sales team. Drone Volt currently offers services ranging
from the drone system to training and administrative support in order to comply with French
regulations. The company is notably authorised by DJI to adapt the piloting software for
professional applications (such as police applications). This integration constitutes commercial and
marketing strength given that the customer receives a turnkey product. This business model is
more profitable than a rental system, which does not offer substantial flexibility (in effect, the
drone is not always available). This lack of flexibility could deter the clientele and increase the costs
borne by the rental company.
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3.2.2 Drone Volt includes three types of services with its equipment sales
Drone Volt sells its drones either alone or in the form of packs. The entire package can include
accessories, specific aerial gimbals, training and material for transporting the drone and equipment.
There are three types of service offers:
Turnkey sales

The organisation of training for the use of drones

After-sales service for the maintenance or repair of drones

Administrative procedures for the use of drones (registrations).
Certain training programmes can be integrated into the packs, while others are organised in groups
in the framework of periodic sessions.
Administrative services respond to regulations established by the French civil aviation authority,
which requires that operators register with the authority, submit an application with the local
prefecture in order to obtain flight authorisation and attend a training programme and obtain a
certificate. Drone Volt can facilitate these administrative procedures by offering an additional
service in its overall offer. The group has additionally set up an academy that offers training
sessions for future drone pilots. This academy benefits from solid infrastructures at Villepinte,
including a hall allowing flight sessions during bad weather. The training activities are expected to
provide €290k in revenues in 2015.
3.2.3 The offer is increasingly focusing on media professionals
A core target market:
media professionals
Since the arrival of the current management team in 2012, Drone Volt has gradually repositioned
itself on its second line of business dedicated to the professional market, which is more lucrative
and offers better opportunities. This segment should contribute €2.2m in revenues in 2015 (60% of
total revenues) and show the strongest growth (+180%).
Drone Volt’s professional clientele can be divided into three broad categories:

Government agencies: Interior Ministry, Air Police, National Police Intervention Unit etc.

Industrials: Bouygues Energies & Services, Thales etc.

Medias:
o
Live news: TF1 Group, France Televisions, Canal+ Group, NextRadioTV, EuropaCorp.
etc.
o
Small operators including programme producers: Freeway (Tour de France).
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The largest end market at present is the media market, particularly television channels, which use
drones to obtain images that were previously impossible to obtain (with helicopters being too
expensive or suffering from limited and/or overly restricted overflight areas). Drone Volt supplies
systems to the principal French television channels, a booming market.
Little concentration in
terms of revenues
The nature of this activity rules out any risk of concentration on a small number of clients. In H1
2015, the company’s ten leading clients generated between €10k and €27k of revenues, with only
two above €20k (€27k and €22k) and with the leading client representing less than 2% of revenues.
3.2.4 Drone Volt works with the four principal international suppliers
The principal suppliers of Drone Volt are the manufacturers of “platforms”. Drone Volt has four
such suppliers, two in Asia, one in the United States and one in Europe.
Numerous other suppliers provide the company with photography or measurement equipment,
chargers, batteries, propellers, command screens, electronic components, software etc. These
suppliers are notably based in Germany and Switzerland. The company is therefore sensitive to
exchange rate variations.
3.2.5 Drones sold for an average price of €10,000
Drone Volt offers technological solutions adapted to the needs of service providers that use drones,
including training and initiation in using the drone.
The drone market is divided into three segments:

Toys (average sale price of €300), the segment on which Parrot operates

Professional drones (€10,000), on which Parrot and Drone Volt are positioned

Military drones (€300,000), covered by the industrial players
Drone Volt provides a response to the needs of professionals through drones based on standard
platforms industrialised in China and fitted with high technology components (infrared camer,
architecture software, photogrammetry, ortho-mosaic etc.) principally coming from Europe. As
such, starting with a chassis and software supplied by companies such as DJI or Yuneec, Drone Volt
creates single drones or small series in its workshop.
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3.3 R&D and international expansion should transform Drone Volt into a manufacturer
3.3.1 An increase in the workforce to accompany the sales team
Revenue growth (>40%/year since 2012) previously relied on word-of-mouth alone. It is therefore
highly probable that the recruitment of nine salespersons in 2015 will give a rapid boost to business
growth.
Acceleration in sales can
be expected
In France, Drone Volt is seeking to be the leader in sales to service providers that hire out their skills
to media players. According to the French civil aviation authority, the number of these service
providers totalled around 400 two years ago and 1,256 at the end of 2014 and will have reached
2,300 in the summer of 2015. Drone Volt will also gradually extend its sales activities to all types of
professional drone applications (aerial cartography, security, inspection, environment and
agriculture). On 9 June 2015, the company announced its registration with the French civil aviation
authority as an aerospace manufacturer. Drone Volt has in this manner confirmed its strategic
position in the industry value chain.
3.3.2 An increase in investments to develop the R&D
While it currently assembles pre-designed parts, the company has created its own R&D team made
up of two persons in order to design proprietary components for its own production. This is the first
step in the direction of the design of a proprietary drone, which should gradually emerge as the
business is developed and will represent a highly differentiating factor. Note that the company filed
its first patent application in June 2015 involving remotely triggered parachute technology.
3.3.3 International expansion: a first subsidiary in Denmark
International strategy:
accompany regulations
Drone Volt plans to develop its business in different countries in Europe and in the United States as
regulations are adopted on these different markets. Thanks to its experience in a highly regulated
environment, the company should be able to transpose its business model to other countries. The
United States is a choice target, as the FAA has recently established new regulations on the federal
level, thereby replacing all the existing regulatory schemes on the state level. This will facilitate the
entry of a foreign players such as Drone Volt onto the US market, as complicated administrative
paperwork linked to the specific requirements of each state will be avoided, thereby opening the
way to accelerated development on this market.
Drone Volt is increasingly well-known among professionals on the international level. The company,
which is already recognised for its expertise in the film industry, was consequently asked by DJI to
help it with its stand at the American village at the 2015 Cannes Film Festival. These types of events
by definition help to rapidly develop the company’s reputation. Drone Volt’s success in France is a
guarantee of seriousness for investors who would like to participate in the company’s international
expansion.
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A first test in Denmark
Drone Volt has just opened its first subsidiary in Denmark, with Kim Larsen responsible for its
development. Kim Larsen is an entrepreneur with substantial experience in the creation of growth
companies. This subsidiary will offer the entire range of civil drones designed by the French parent
company to a professional and retail clientele through the online sales website www.dronevolt.dk.
As in France, the activities of this new subsidiary will include the marketing of turnkey solutions
including drones and image stabilisation systems, accessories, specific aerial gimbals, equipment,
pilot training, all the administrative procedures and a complete range of other services. The mission
of this subsidiary will be the conquest of all of Scandinavia (Norway, Sweden, Finland).
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4 – Strategy and valuation: hyper-growth to manage
4.1 Revenues: forecast 2014/19 CAGR of +66%
p.23
4.2 Widening gap between professional and mass market gross margins
p.24
4.3 Hyper-growth and structuring
p.25
4.4 Profitability that should accelerate starting in 2017
p.27
4.5 WCR: the factor limiting growth
p.27
4.6 Still weak cash generation
p.28
4.7 Valuation: a DCF valuation is the only pertinent approach
p.29
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4 – Strategy and valuation: hyper-growth to manage
4.1 Revenues: forecast 2014/19 CAGR of +66%
Using an annual growth rate for revenues of manufacturers and operators close to that forecast by
Xerfi for 2014/2019, we obtain revenues of nearly €22m by 2019. We have taken account the new
Danish subsidiary that will cover Scandinavia and Germany, corresponding to a market of over 100
million inhabitants.
We assume that this subsidiary will develop at the same pace as the parent company with a lag of
three years. We have voluntarily excluded the learning curve at the parent company.
€m
REVENUES
Revenues France
Revenues - mass market
Revenues - professional
Revenues - services
Revenues - Danish subsidiary
Revenues - mass market
Revenues - media professionals
Revenues - services
12/14
1,71
1,71
0,94
0,75
0,02
12/15e
3,68
3,34
1,18
2,11
0,05
0,34
0,24
0,10
0,00
12/16e
7,20
5,97
1,41
4,43
0,13
1,23
0,86
0,36
0,01
12/17e
11,20
9,48
1,70
7,53
0,26
1,71
0,94
0,75
0,02
12/18e
16,22
12,88
1,95
10,54
0,39
3,34
1,18
2,11
0,05
12/19e
21,86
15,88
2,24
13,18
0,46
5,97
1,41
4,43
0,13
Source : Invest Securities
An emerging market that
should generate hypergrowth
Additionally, growth should be driven by both new clients but also by a certain degree of repeat
business, as existing (professional) clients should very rapidly generate profits from their
investments and should therefore not hesitate to purchase new, better performing models.
Additionally, piloting activity often leads to a partial or total loss of the drone, thereby also boosting
repeat business. In 2014, 30% of revenues were recorded with existing clients. This percentage
should rise over the coming years.
The company’s strategy is to increasingly focus on professional clients, which generate higher
margins. Drone Volt effectively contributes increasing amounts of added value by completely
“customising” its drones in order to adapt them to a particular activity (example: the Drone Spray
for the cleaning of roofs). We anticipate very substantial growth in this segment (professional and
associated service offer revenues) in 2015 and 2016 (respectively +180% and +110%), growth that
should continue (albeit at lower rates) over the following years.
Forecast growth in group revenues by business segment
€m
REVENUES
Revenues France
Revenues - mass market
Revenues - professional
Revenues - services
Revenues - Danish subsidiary
Revenues - mass market
Revenues - media professionals
Revenues - services
12/14
12/15e
12/16e
12/17e
12/18e
12/19e
39,6%
114,9%
95,6%
55,5%
44,8%
34,8%
100,0%
90,7%
83,0%
84,7%
79,4%
72,7%
10%
25%
20%
20%
15%
15%
112%
180%
110%
70%
40%
25%
40%
200%
150%
100%
50%
20%
0,0%
9,3%
17,0%
15,3%
20,6%
27,3%
n.s.
10%
25%
20%
n.s.
112%
180%
110%
n.s.
40%
200%
150%
* Only five months of revenues for the Danish subsidiary in 2015
Source: Invest Securities
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4 – Strategy and valuation: hyper-growth to manage
As such, the weighting of the professional segment in total revenues should steadily increase. In H1
2015, professional + service revenues already represented 55% of revenues (vs. 45% in 2014).
Two increasingly distinct
markets …
Revenues - mass market
Revenues - professional
Revenues - services
2014
55%
44%
1%
2015e
38%
60%
1%
2016e
32%
66%
2%
2017e
24%
74%
2%
2018e
19%
78%
3%
2019e
17%
81%
3%
Source: Invest Securities
4.2 Widening gap between professional and mass market gross margins
… with different margins…
The gross margin in the mass market segment has traditionally been lower than in the professional
segment, as the service provided is not the same. In the mass market segment (i.e. online sales),
the model is closer to pure distribution, while for professions, Drone Volt provides increasing
amounts of added value. In addition to onsite training services, compliance with local standards and
assistance in the filing with the civil aviation authority (mandatory for professionals), the company
offers its own customised drone models (Drone Spray, Z18) and innovates with original products
such as Drone Station, a type of mobile command centre that allows several drones to be
controlled from the same spot.
In H1 2015, the gross margin equalled 26.4% (vs. 28.9% in 2014). This difference can be explained in
the following manner:
A non-representative H1
2015

The brutal fall in the euro at the beginning of the year at the same time the company’s
principal supplier (DJI, the leader in China) was billing in dollars. This problem has been
definitively resolved, with DJI now billing in euros.

A mix effect due to the success of Phantom 3 from DJI (quadcopter equipped with a HD
camera, ready to fly and extremely easy to pilot), whose low list price (set by DJI) generated
a lower margin than other products,

A new import tax on “flying cameras” of 7.5% at the same time the tax on simple drones
(without cameras) equals 4.5%. Here again, the problem will be largely resolved through the
importing of the two products separately (excluding packaged products sold as presented).
Corrective actions have therefore already been taken, with the most important being:

Greater diversification in terms of suppliers: DJI represented around 70% of the company’s
purchases in H1 2015 (vs. 80% in 2014 and before). It should represent 60% of purchases in
2016 and this percentage should gradually decline over the medium term.

The increasing importance of customised products, where the gross margin equals 40%.
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4 – Strategy and valuation: hyper-growth to manage
As such, we anticipate a slight increase in the gross margin in H2 2015, but most importantly a gain
of 3 points in 2016. Starting in 2017, we maintain the margin stable at 25% for the mass market
segment and assume an increase in the professional segment reflecting a mix effect of 1 point and
then 1.5 points through 2019, thereby reaching a target margin of 35%.
Gross margin forecasts by business segment
€m
Gross profit - mass market
Gross profit - professional
Gross profit - services
GROSS PROFIT
12/14
12/15e
12/16e
22,0%
28,9%
25,0%
12/17e
12/18e
25,0%
12/19e
25,0%
25,0%
28,0%
31,0%
32,0%
33,5%
35,0%
100,0%
100,0%
100,0%
100,0%
100,0%
26,8%
30,5%
32,0%
33,7%
35,1%
Source: Invest Securities
4.3 Hyper-growth and structuring
Hyper-growth…
The company has developed extremely rapidly: as of end 2014, it had only five employees while
revenues reached €1.7m and were growing very strongly. There was an imperative need to recruit
and structure in order to meet the demand. This was largely accomplished in H1 with the signing of
a lease on new premises including a flight room and, most importantly, the recruitment of 12
persons in France and two at the Danish subsidiary for sales, support and administrative positions.
We do not anticipate any more recruitment in 2015 but six additional employees in 2016, with an
average salary of €52k (2%/year growth in the average salary in 2015). By 2019, the group (France +
Denmark) could have over 50 employees.
Growth in the number of employees and average salaries
Number of employees at the beginning of th
Hiring France
Hiring Scandinavian subsidiary
12/14
4
1
0
12/15e
6
12
2
12/16e
20
4
2
12/17e
26
4
4
12/18e
34
6
6
12/19e
46
6
10
Number of hires
Number of employees at yearend
Average number of employees
Average expensed salary (€m)
Total payroll
Revenues / average no. of employees (€m)
1
5
5
0,041
0,18
0,38
14
20
13
0,051
0,66
0,28
6
26
23
0,052
1,20
0,31
8
34
30
0,053
1,59
0,37
12
46
40
0,054
2,16
0,41
16
62
54
0,055
2,98
0,40
Source: Invest Securities
…requiring rapid
structuring
This trend leads us to initially forecast a falling revenues / employee ratio in 2015 and 2016 before
rising to slightly above historical levels afterwards.
We believe that this is prudent for the following reasons:

The increase in the percentage of sales to professions, which should lift the average basket
(mix effect)

The increase in the number of products with high per unit prices (example: Drone Station at
€100k).
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4 – Strategy and valuation: hyper-growth to manage
The company’s organisational chart is currently as follows:
Dimitri Batsis
CEO
Amélie Moreau
Executive assistant
Jérôme Marsac
Investor relations
Patrick Chanois
Head of sales
Bernard Berthier
Head of training
Marine Garnier
Head of logistics
Alexandre Hardouin
Head of R&D
Léa Bienaimé
Head of marketing, web
& social medias
Coralie Baudot
Assistant head of web
projet
Thomas Leonard
Software development
Patrick Chanois
Major account sales
Ludovic Senrent
Logistics technician
Morgan Berger
Software development
Véronique Praxelle
Wholesale accounts
Nicolas Laugier
Technical centre
technician
Olivier Avril
Admin. / fin. director
François Decle
Dir. of human resources
Laurent Garrouste
Management controller
Céline Vergely
Press officer
Mathias Lawal
Events officer
Eric Nesmon
Sales engineer
FRANCE
Kim Larsen
Head of Scandinavia
Nenjamin Hansen
Head of Technical &
Sales
DENMARK
Legend
Part-time
Management
Consultants
Source: company
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4 – Strategy and valuation: hyper-growth to manage
4.4 Profitability that should accelerate starting in 2017
2015 will therefore be a year of structuring and human investment. As such, even if revenue
growth will be strong, we do not anticipate a positive operating margin. The margin could
nevertheless be close to breakeven in 2016 before trending up to around 15%.
Forecast P&L statement
2016, the year of
breakeven
€m
REVENUES
GROSS PROFIT
Other revenues
Lease charges
Other outside charges
ADDED VALUE
Salaries & charges
Profit sharing
Operating subsidies
Taxes
Other income
Other charges
EBITDA
Writeback of provisions
Depreciation / amortisation
Provisions
Total net depreciation / amortisation / pro
EBITA
Non-current operating income
Non-current operating charges
NON-CURRENT OPERATING INCOME
EBIT
EBIT margin
12/14
1,71
0,49
0,00
-0,26
0,23
-0,18
0,00
0,00
0,00
0,00
0,00
0,05
0,00
-0,01
0,00
-0,01
0,04
0,00
0,00
0,00
0,04
2,4%
12/15e
3,68
0,98
0,00
-0,05
-0,55
0,39
-0,80
0,00
0,00
-0,02
0,00
0,00
-0,42
0,00
-0,04
-0,04
-0,08
-0,50
12/16e
7,20
2,19
0,05
-0,09
-0,80
1,35
-1,20
0,00
0,00
-0,03
0,00
0,00
0,12
0,00
-0,04
-0,06
-0,10
0,02
12/17e
11,20
3,58
0,00
-0,12
-0,94
2,52
-1,59
0,00
0,00
-0,05
0,00
0,00
0,89
0,00
-0,04
-0,08
-0,12
0,77
12/18e
16,22
5,46
0,00
-0,13
-1,04
4,29
-2,16
0,00
0,00
-0,07
0,00
0,00
2,06
0,00
-0,05
-0,11
-0,15
1,91
12/19e
21,86
7,67
0,00
-0,13
-1,10
6,45
-2,98
0,00
0,00
-0,10
0,00
0,00
3,36
0,00
-0,05
-0,15
-0,20
3,17
0,00
-0,50
0,00
0,02
0,00
0,77
0,00
1,91
0,00
3,17
-13,6%
0,3%
6,8%
11,8%
14,5%
Source : Invest Securities
Tangible investments are relatively low. They are made up each year of tools and measurement
instruments and IT, delivery and handling equipment. This explains the low level of depreciation /
amortisation charges. The R&D investments that we estimate at around €150k/year will be
amortised over 36 months, with the research tax credit financing around 1/3. Concerning the
international development, €250k in investments per subsidiary should be assumed. After
Denmark, the company plans to set up other subsidiaries. We have not integrated this upside
potential into our forecast, as we believe that the company does not currently have the financial
strength needed to launch this new project.
WCR under control …
4.5 WCR: the factor limiting growth
From the very start, Drone Volt has required advance payment from its clients, both retail
customers and major accounts. This enabled the company to show days sales outstanding of 15
days (4% of revenues) in 2014. Unfortunately, this situation will not be able to be maintained with
the arrival of very large accounts. In order to anticipate this, we estimate that the number of days
sales outstanding will double starting this year to 30 days. As concerns inventories, the very strong
growth also implies a high level of inventories (with the number of listed products increasing). We
believe that inventories will rise from 12% to 18% of revenues (corresponding to 65 days of sales)
starting this year.
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4 – Strategy and valuation: hyper-growth to manage
…but remaining a factor
limiting growth …
Finally, the dominance of the Chinese supplier DJI, which requires payment on delivery, is weighing
on the suppliers line (only 7% of purchases in 2014). This is the only component of the WCR that
should improve over time thanks to the increase in the number of suppliers (certain of which
impose easier terms) as well as the growing weight of the company vis-à-vis its suppliers. We
consequently anticipate a linear increase to around 10% of purchases. Additionally, the
establishment of a non-recourse factoring contract will help to stabilise the client receivables line
while the MTO (made to order) activity with major accounts should limit inventory requirements.
Balance sheet key figures (EURm)
Working Capital
Trade Working capital requirement
Working Capital Requirement
Capital employed (excl. Goodwill)
Capital employed (incl. Goodwill)
Net Debt
Gearing
12/14
0,17
0,19
0,17
0,22
0,22
0,00
1%
12/15e
-0,31
0,74
0,66
0,93
0,93
0,96
n.s.
12/16e
-0,35
1,42
1,24
1,58
1,58
1,59
n.s.
12/17e
0,10
2,15
1,79
2,19
2,19
1,69
322%
12/18e
1,39
3,14
2,58
3,03
3,03
1,19
68%
12/19e
3,52
4,26
3,45
3,96
3,96
-0,07
-2%
Source: Invest Securities
In conclusion, we estimate that the WCR will equal 20% of revenues starting in 2015 and then
remain relatively stable in terms of % of revenues.
4.6 Still weak cash generation
In order to finance its hyper-growth, the company, which has not yet reached positive cash flow
from operations, made use of several sources of financing in H1 2015:
….unless adequate
financing can be
obtained

A capital increase totalling €0.28m at the beginning of the year in connection with its listing
on the Free Market. The company views this listing as a step leading up to a listing on a
regulated market.

A loan of €0.3m from a bank partner on very advantageous terms (five-year duration,
interest rate of 1%)

An OSEO loan of €0.75m running seven years with repayment deferred for two years at an
interest rate of 2%.
Cash Flow Statement (EURm)
Net earnings
Depr. & Prov.
Other non cash impacts
Declared Cash Flow
Change in WCR
Capital Expenditure
Operating Free Cash Flow
Rights' issue
Mov. in net cash
New debt
Debt reimbursment (old)
New debt (short term)
Debt reimbursment (short term)
Mov. in net cash after debt
12/14
0,04
0,01
0,00
0,05
0,01
-0,05
0,01
0,00
0,01
0,05
-0,01
12/15e
-0,51
0,08
0,00
-0,43
-0,55
-0,27
-1,25
0,28
(0,97)
1,05
-0,01
0,05
0,07
12/16e
0,02
0,10
0,03
0,09
-0,68
-0,10
-0,69
0,00
(0,69)
12/17e
0,52
0,12
0,03
0,61
-0,73
-0,10
-0,22
0,00
(0,22)
12/18e
1,29
0,15
0,03
1,41
-0,99
-0,10
0,32
0,00
0,32
12/19e
2,15
0,20
0,03
2,31
-1,12
-0,10
1,09
0,00
1,09
-0,01
0,70
0,00
(0,06)
-0,01
1,20
-0,70
0,16
-0,01
1,20
-1,20
0,15
-0,01
0,50
-1,20
0,21
Source: Invest Securities
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4 – Strategy and valuation: hyper-growth to manage
Our forecasts assume that the company will obtain new financing. We anticipate that this financing
will take the form of a short-term loan in 2017 for a maximum of €1.2m. This should not pose any
particular problem, all the more given that the company will have already repaid a portion of its
bank loan.
We nevertheless believe that the company’s weak equity funds will weigh on its growth over the
short term, as shown by our strained forecast balance sheet. A significant capital raising exercise
would give the company the manoeuvring room that it will need, notably in case of very large
clients.
4.7 Valuation: a DCF valuation is the only pertinent approach
4.7.1 Few peers…and no useable consensus
There is no truly comparable listed company that can be used here, While a portion (around 50%)
of Parrot’s business does involve drones, the large majority of revenues in this segment are
generated on the mass market. We have therefore chosen three companies that could be viewed
as relative close.
Cybaero is an aerospace company based in Sweden. The company, which was founded in 2003,
develops and sells remotely piloted aircraft systems. It had revenues of SEK46.8m in 2014 and its
stock market capitalisation equalled €27.5m as of 29 September 2015.
AeroVironment is a US company based in California that specialises in the design and production of
vehicles, particularly aircraft. Founded in 1971 by the aerospace engineer Paul McCready, the
company became known through the Gossamer Condor, the first human-powered aircraft, in the
1970s. It has since specialised in the design and production of civil and military drones and
presented in 2011 the Nano Hummingbird, a drone barely larger than a hummingbird. The
company has also developed, in partnership with Caltech, the MicroBat, an ornithopter (drone with
flapping wings). AeroVironment has as such become the leading company in the miniature drones
segment, particularly with its Raven, WASP and Puma AE models. The company had revenues of
$251m in 2014 and its stock market capitalisation equalled €415.6m as of 29 September 2015.
Drone Aviation Holding designs and produces unmanned aerial systems by combining engineering,
software and security systems. The company had revenues of $0.85m in 2014 and its stock market
capitalisation equalled €12.1m as of 29 September 2015.
However, either there are no consensus estimates for these companies (Drone Aviation and
AeroVironnement) or the consensus only applies to 2017, a year that will not be representative for
Drone Volt. We set out in the following table (for information purposes only) the ratios that can be
obtained for these stocks.
Univers de comparables
Parrot SA
CybAero AB
Drone Aviation Holding Corp.
AeroVironment, Inc.
Moyenne
Price (€) Capi (m€)
43,0
534,5
1,0
27,5
0,1
12,1
17,7
415,6
247,4
VE/EBIT
2017
2018
15,5
nd
9,0
nd
nd
nd
nd
nd
12,2
nd
VE/EBITDA
2017
2018
9,6
nd
5,1
nd
nd
nd
nd
nd
7,4
nd
VE/CA
2017
2018
1,3
nd
0,5
nd
nd
nd
nd
nd
0,9
nd
Source: Consensus Factset au 29/09/15
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4 – Strategy and valuation: hyper-growth to manage
4.7.2 Discounted Cash Flows method
Principal assumptions
We have used our forecasts for the 2015 to 2019 period, with a normalised cash flow in 2026. We
then established the cash flows using the following assumptions:
 an average intermediate growth rate (2019/2026) of 15%
 a conservative perpetual growth of 0.5%
 a normalised operating margin of 15% over 2020-2026
 a normalised WCR equal to 20% of revenues
Hypothesis
Horizon
2019/2025 growth
Normative operational margin (post 2020)
Perpetual growth
Normative WCR (% turnover)
10 ans
15,0%
15,0%
0,5%
20,0%
Source: Invest Securities
The group’s investments and depreciation / amortisation charges are moderate. The changes in the
WCR are essentially linked to changes in revenues. We use a theoretical tax rate of 33% over the
entire period. Concerning the research tax credit, we calculate it based on two full-time dedicated
employees at the rate of 30%.
Calculation of the WACC
In order to calculate the cost of capital, we have used a risk-free rate of 1.05% (3-month average for
the 10-yr OAT as of 29/9/15) and a market risk premium of 5.34% as calculated by Factset
(compared to the CAC 40, 3-month average as of 29/9/15). We do not use a beta in our calculation
of the cost of capital, as the share has not been listed long enough for this figure to be significant.
Instead, we use a specific risk premium that we have assumed to equal 6%.
As the company has very little debt (estimated net debt of €1m at yearend 2015), our discount rate
is therefore almost exclusively based on the cost of capital and therefore equals 11.7%.
Discount rate
Market capitalization
Risk free rate
Market premium
Specific risk premium
Cost of capital
Cost of debt
Taxes
Net cost of debt
Net debt
Equity
Discount rate
11,9
1,1%
5,3%
0,06
12,4%
2,0%
33,0%
1,3%
6,4%
93,6%
11,7%
Source: Factset as of 29/9/15
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4 – Strategy and valuation: hyper-growth to manage
Cash flows and valuation table
m€
Sales
EBIT
Ebit margin
Net depreciation
EBITDA
Theoretical taxes
EBIDA
WCR
Change in WCR
Investments
Free cash flow
coeff
Discounted Free cash flow
12/14
1,7
0,0
2,4%
0,0
0,0
33,3%
0,0
0,2
0,1
-0,2
-0,1
-0,2
0,0
12/15
3,7
-0,5
-13,6%
0,1
-0,4
33,3%
-0,3
0,7
0,2
-0,5
-0,3
-1,1
0,2
12/16
7,2
0,0
0,3%
0,1
0,1
33,3%
0,1
1,4
0,2
-0,7
-0,1
-0,7
1,2
12/17
11,2
0,8
6,8%
0,1
0,9
33,3%
0,6
2,1
0,2
-0,7
-0,1
-0,2
2,2
12/18
16,2
1,9
11,8%
0,2
2,1
33,3%
1,4
3,1
0,2
-1,0
-0,1
0,3
3,2
12/19
21,9
3,2
14,5%
0,2
3,4
33,3%
2,3
4,3
0,2
-1,1
-0,1
1,1
4,2
12/20
25,1
3,8
15,0%
0,0
3,8
33,3%
2,5
5,0
0,2
-0,8
-0,1
1,7
5,2
12/21
28,9
4,3
15,0%
0,0
4,3
33,3%
2,9
5,8
0,2
-0,8
-0,1
2,0
6,2
12/22
33,2
5,0
15,0%
0,0
5,0
33,3%
3,3
6,6
0,2
-0,9
-0,1
2,4
7,2
12/23
38,2
5,7
15,0%
0,0
5,7
33,3%
3,8
7,6
0,2
-1,0
-0,1
2,7
8,2
12/24
44,0
6,6
15,0%
0,0
6,6
33,3%
4,4
8,8
0,2
-1,1
-0,1
3,2
9,2
12/25
50,6
7,6
15,0%
0,0
7,6
33,3%
5,1
10,1
0,2
-1,3
-0,1
3,6
10,2
Source: Invest Securities
Our DCF approach gives a valuation of €16.2m, corresponding to €14.5/share on a totally nondiluted basis. In effect, the company has warrants (1,117,000), However, the exercise price of €27
(1 share for 10 warrants) is too far from the current valuation.
DCF synthesis (€m)
Discounted cash flows value
Discounted terminal value
Minority interests
Discounted tax credit value
Net capital increase
Valuation
€m
5,6
10,6
0,0
0,0
0,0
16,2
€/share
5,0
9,5
0,0
0,0
0,0
14,5
The terminal value represents 66% of the valuation, reflecting the anticipated strong growth and
the company’s current size.
Sensitivity tables
The key parameters in the valuation are:
 the intermediate growth rate (2019/2026)
 the normalised operating margin
 the normalised WCR
 the WACC
We have varied these different parameters in order to give investors an idea of their impact.
The following table shows that the growth assumptions are key here. In effect, with a constant
perpetual growth rate of 0.5%, four additional percentage points of growth on average over the
2019/2025 period lead to an 11% increase in the valuation.
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
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4 – Stratégie et valorisation : une hyper-croissance à gérer
14,5
-1,0%
-0,5%
0,0%
0,5%
1,0%
1,5%
2,0%
Sensivity table to 2019/2025 growth and to perpetual growth
12,0%
13,0%
14,0%
15,0%
16,0%
17,0%
18,0%
12,3
12,6
12,9
13,3
13,6
14,0
14,3
12,6
13,0
13,3
13,7
14,0
14,4
14,7
13,0
13,4
13,7
14,1
14,4
14,8
15,2
13,4
13,8
14,2
14,5
14,9
15,3
15,7
13,9
14,3
14,6
15,0
15,4
15,8
16,2
14,4
14,8
15,2
15,6
16,0
16,4
16,8
14,9
15,3
15,8
16,2
16,6
17,1
17,5
19,0%
14,7
15,1
15,6
16,1
16,6
17,3
18,0
Similarly, the sensitivity to the WACC and the normalised operating margin is very significant, as
shown by the following table. One additional percentage point of profitability combined with a halfpoint reduction in the discount rate would lead to a +28% increase in the valuation.
14,5
8,7%
9,7%
10,7%
11,7%
12,7%
13,7%
14,7%
12,0%
16,9
14,1
12,0
10,3
8,8
7,7
6,7
Sensivity table to WACC and normative operational margin
13,0%
14,0%
15,0%
16,0%
17,0%
19,1
21,4
23,7
25,9
28,2
16,1
18,0
19,9
21,8
23,7
13,6
15,3
16,9
18,6
20,2
11,7
13,1
14,5
16,0
17,4
10,1
11,3
12,6
13,8
15,1
8,8
9,9
11,0
12,1
13,2
7,7
8,6
9,6
10,6
11,6
18,0%
30,5
25,7
21,9
18,8
16,3
14,3
12,5
19,0%
32,8
27,6
23,5
20,3
17,6
15,4
13,5
Finally, the “growth / WCR” pair plays a dominant role. Greater control over the WCR resulting in a
6-percentage point gain would have a 16% impact assuming constant growth.
14,5
14,0%
16,0%
18,0%
20,0%
22,0%
24,0%
26,0%
Sensivity table to normative WRC and 2019/2025 growth
12,0%
13,0%
14,0%
15,0%
16,0%
17,0%
18,0%
15,3
15,8
16,3
16,9
17,4
18,0
18,6
14,7
15,1
15,6
16,1
16,6
17,1
17,6
14,1
14,5
14,9
15,3
15,8
16,2
16,7
13,4
13,8
14,2
14,5
14,9
15,3
15,7
12,8
13,1
13,4
13,8
14,1
14,4
14,7
12,2
12,5
12,7
13,0
13,2
13,5
13,8
11,6
11,8
12,0
12,2
12,4
12,6
12,8
19,0%
19,2
18,2
17,1
16,1
15,0
14,0
13,0
The above tables show that the existing sources of leverage could suggest a valuation reaching
€19-20 in case of validation of the long-term growth and the level of the WCR. In the meantime,
we are initiating coverage of Drone Volt with a BUY rating and a target price of €14.5.
Les informations contenues dans ce document, puisées aux meilleures sources ne sauraient engager notre responsabilité en cas d’erreur ou d’omission
REPRODUCTION INTERDITE SAUF AUTORISATION
Invest Securities, 73 boulevard Haussmann 75008 PARIS, France
Tel : + 33 (0) 1 44 88 77 88
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Invest Securities
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Relative and absolute change price
18
16
14
12
10
8
6
4
2
0
21/04/15
05/05/15
19/05/15
02/06/15
16/06/15
Drone Volt
30/06/15
14/07/15
28/07/15
11/08/15
25/08/15
08/09/15
22/09/15
Drone Volt vs CAC mid & small
CONFLICT SCREEN
Drone Volt
Corporate
Finance
Treasury stocks holding
Prior communication
Oui
Non
Oui
Analyst's
personnal
interest
Non
Liquidity
contract
Listing Sponsor
Research
contract
Non
Non
Oui
DISCLAIMER
Thi s document does not cons ti tute a n offer to buy or s el l s ecuri ti es i s s ued by the a bove menti oned compa ny. The foregoi ng i nforma ti on, foreca s ts a nd
opi ni ons , a re the res ul t of the bes t efforts of thos e i nvol ved i n thei r compi l a ti on, a nd a re bel i eved to be coherent a nd rea s ona bl e. The di rectors ,
ma na gers a nd empl oyees of Inves t Securi ti es ca nnot be hel d res pons i bl e for the a ccura cy a nd compl etenes s of thi s document’s contents a s a
cons equence of a ny form of gua ra ntee. No i ndi vi dua l ca n be hel d l i a bl e for a ny l os s res ul ti ng from the us e of thi s document, or a ny el ement thereof,
to i nves t i n ma rketa bl e s ecuri ti es . The condi ti ons for the prepa ra ti on, producti on a nd di s tri buti on of thi s res ea rch a re ful l y compl i a nt wi th a rti cl es 321122 to 321-142 of the “AMF”- the French fi na nci a l ma rkets regul a tor.
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NOTES
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NOTES
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