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Etteplan - Looking to improve

Etteplan publishes its Q1 results on 8th of May. We expect year-on-year revenue growth boosted by acquisitions while profitability improvement is driven mainly by a softer comparison period affected by NRIs.

Market has remained slow for Etteplan’s clients

The machinery and metal industry, which is vital for Etteplan, faced difficulties throughout 2023. Based on data from Technology Industries of Finland, the Finnish machinery and metal industry order backlog stood 16% lower at the end of 2023 when compared to 2022. The consensus forecasts point towards slower growth in 2024E for selected publicly listed blue chip customers of Etteplan. The growth forecasts have been revised downwards during the beginning of the year as some of the companies have reported modest Q1 results. On a positive note, the ECB is still expected to cut rates in June. Etteplan expects the rate cuts to boost investments and improve the demand situation.

 

Expecting y/y EBIT improvement in Q1

Etteplan has continued to make bolt-on acquisitions to support its growth strategy. In 2023, the company acquired two companies operating in Software and Embedded and Engineering Solutions business areas. At the start of 2024, Etteplan acquired STRONGIT ApS which is a Danish Software and Embedded company. While we expect modest organic net sales development for Q1, the acquisitions made during 2023 and early 2024 are expected to provide y/y growth for Q1/24. In terms of profitability, we expect improvement over the first quarter of 2023 as the comparison period was affected negatively by NRIs. We have not made major estimate changes for Q1 2024, we expect net sales of EUR 99m and EBIT of EUR 7.3m. For FY 2024, we are slightly below the financial guidance middle point for both net sales (guidance EUR 375m-415m, Evli est. EUR 387m) and EBIT (EUR 28-34m, Evli est. EUR 30.5m).

 

Valuation remains neutral

Etteplan is currently valued at 8-7x EV/EBITDA and 13-11x adj. P/E on our estimates for 2024-2025E. The current valuation is in line with the peer group, the company’s historic multiple levels and the multiples seen in recent industry transactions. We keep our TP at EUR 14.0 with HOLD-rating intact.

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