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Etteplan - Uncertainties remain high

Etteplan reported Q3 figures that were below our estimates. The company’s sales and EBIT were at EUR 80.0m (Evli est. EUR 81.7m) and EUR 5.0 (Evli est. EUR 5.8m) respectively. The main drivers behind the lower-than-expected results were Technical Communication and Engineering Solutions service areas.

Weak market continues to hamper the development

Net sales in Q3 were EUR 80.0m (EUR 80.3m in Q3/22), slightly below our estimates and consensus estimates (EUR 81.7m/82.0m Evli/Cons.). EBIT in Q3 amounted to EUR 5.0m (EUR 5.8m in Q3/22), below our estimates and consensus estimates (EUR 5.8m/6.0m Evli/cons.), at a margin of 6.2%. The worst development was seen with Technical Communication Solutions as the service area suffered from weak demand even more than expected, particularly in the Central European market.

 

Soft Q3 adds pressure for the remainder of the year

Etteplan kept its guidance unchanged (from September): revenue is estimated to be EUR 355-370m and EBIT EUR 26-28.5m. The company has implemented corrective measures for Technical Communication and Engineering Solutions to improve operational efficiency going forward. We expect that the company will return to revenue growth in Q4 helped by growth in ES and less severe revenue decline expected in S&E driven by the slight pickup in product development projects. Profitability in Q4/23 is expected to be at a slightly lower level when compared to Q4/22. We currently forecast revenue of EUR 360.4m and EBIT of EUR 26.0m for the FY 2023. Our estimates lie at the lower end of the company’s guidance range, and we see that the soft Q3 has increased pressure to reach the guidance for Q4. For 2024E, we see the demand being slow at the start of the year yet picking up towards the latter part of the year while profitability climbs closer to the levels seen 2021-2022.

 

HOLD with a TP of EUR 13.0

Etteplan continues to trade 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. With uncertainties persisting, we struggle to find positive drivers for the stock. We retain our TP at EUR 13.0 with HOLD-rating intact.

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