Etteplan - Slower quarter ahead

Profit warning set the tone for H2

Etteplan’s Q2 was soft as the y/y growth slowed down to near zero driven by the modest performance of the Software and Embedded Solutions segment. In September, Etteplan released a profit warning and lowered and specified its guidance for 2023. According to the new estimate, the revenue is estimated to be EUR 355-370m (prev. EUR 360-380m) and EBIT to be EUR 26-28.5m (prev. EUR 28-31m). Our FY 2023 estimates for sales and EBIT are at EUR 360.7m and EUR 26.5m respectively.

Anticipating continued growth from Engineering Solutions

The profit warning was prompted by a combination of factors, including the subdued performance of the Software and Embedded operational area during Q2, NRIs and FX effects during H1, and more recently, shifts in demand from specific clients in the Technical Communication Solutions service area in Central Europe. To our understanding, the company has not been able to adjust its workforce according to the demand which has led to capacity utilization issues in Central Europe. We make slight negative estimate adjustments ahead of Q3. Our estimate for Q3 net sales is now at EUR 81.7m and EBIT at EUR 5.8m. We forecast continued growth and profitability for the company’s largest segment, Engineering Solutions as the demand for Engineer-to-Order projects remains strong. For Software and Embedded and Technical Communications we continue to forecast y/y revenue decline for both Q3 and Q4. In addition to changes to the FY 2023 estimates, we revise our estimates down for FY 2024.

HOLD with a TP of EUR 13.0

With our updated estimates, Etteplan trades at a premium of roughly 10-15% on 23-24E EV/EBITDA basis when compared to our peer group. The current valuation levels are quite well in line with the company’s historic levels. We retain our TP at EUR 13.0 with HOLD-rating intact.