FILA Group (FILA.MI) Initiating Coverage

One-off pressures cause a growing market leader to screen poorly; valuable equity stake on balance sheet provides downside protection

We are building out Sophon Microcap Atlas into the premier destination for research on underfollowed sub-$500M market cap companies.

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View: Strong Buy

Sophon Score: 79/100 (see evaluation rubric at end of note)

$FILA.MI is an art and office supplies company with a history over 105 years. It operates 22 production facilities and 33 subsidiaries/brands across five continents

FILA owns well-known brands such as Giotto, Tratto, Das, Lyra, Daler-Rowney, Ticonderoga, Canson, and Arches, which are deeply rooted in consumer memory across generations and continents. For instance, Dixon Ticonderoga is the leading graphite pencil brand in the USA, holding over 50% of the market.

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Key Insights:

• Significantly undervalued: FILA's current market valuation significantly understates its true worth, largely due to its substantial stake in DOMS Industries Limited ($DOMS.NS). While FILA's total market value, including both traded and non-traded B shares, is around €490 million, its 26.01% stake in DOMS alone was valued at approximately €379M as of this date. This effectively means the rest of FILA's established global business is being valued at less than 2x LTM earnings. FILA’s use of the equity method of accounting (a historical cost method) further obfuscates economic value of their asset on the books

• Tons of upside/optionality: Company is currently priced for zero growth. It has some additional upside depending on how much of its 26.01% stake in $DOMS.NS it sells and when. Until then it pays a healthy dividend while you wait.

• Strong insider alignment: Management, led by CEO Massimo Candela (grandson of the founder), holds a significant 38.9% stake in the company (Pencil S.p.A. holds 27.06% of ordinary shares and 53.37% of voting rights). This strong alignment of interests between management and shareholders incentivizes decisions that drive long-term shareholder value. The board's consistent dividend policy further underscores its commitment to returning capital to shareholders.