Etteplan - Back to profitable growth track

The outlook for 2024 looks brighter after the tough 2023. We estimate profitable growth fueled by market recovery in H2, inorganic growth, and continued self-help.

Technical Communication Solutions improved after soft Q3

Etteplan’s Q4 2023 brought no real surprises on the group level as they were approximately in line with the preliminary figures. Net sales in Q4 came in at EUR 95.2m, revenue grew 4.6% y/y, yet increased 6.5% at comparable FX rates. EBIT in Q4 amounted to EUR 8.2m (EUR 8.4m in Q4/22), at a margin of 8.6%. At segment level, the company’s Technical Communication Solutions was a positive surprise as the measures to improve profitability after the soft Q3 brought EBITA margin to 9.4% (7.7% Q4/22). Software and Embedded was slightly weak due to the high number of sick leaves and larger-than-expected number of holidays affected the segment more than the others.

 

Profitable growth in 2024 aided by acquisitions

We have made some slight adjustments to our estimates for 2024E based on the outlook and comments by the management. We expect organic growth to be slow during the first half of the year as we predict no sudden change in the market environment. On the other hand, we estimate a slight pick-up in organic growth towards the end of the year driven by the expected lower interest rate environment and softer comparison period. In addition to organic growth, we expect growth to be supported by the companies acquired in 2023 and early 2024. In terms of profitability, we estimate EBIT of EUR 30.7m for FY 2024 with EBIT margin of 8.0% (2023: 7.6% excl. NRIs). Engineering Solutions should show a small improvement, while Software and Embedded and Technical Communication Solutions should see a significant y/y improvement due to the corrective actions that Etteplan took for the service areas in 2023.

 

HOLD with a TP at EUR 14.0 (prev. EUR 13.0)

On 2024E EV/EBITDA basis, Etteplan trades at a premium of 6% compared to its peers, and on adj. EV/EBITA and P/E basis, it trades roughly level to peers. In our view, a slight premium is warranted due to its above-average margins and capital efficiency. With the slightly higher estimates and peer multiples for 2024E we raise our TP to EUR 14.0 with rating kept at HOLD.
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