Etteplan - At the mercy of the market
Etteplan lowered its guidance as the market conditions have remained weak. While 2024E looks to be another gap year in the profitable growth story, we still consider the valuation undemanding for 2025-2026E.
Market continues to challenge
Etteplan released a profit warning and expects revenue to be EUR 360-375 million and EBIT about EUR 24-27 million (prev. revenue EUR 375 – 390m and EBIT EUR 28-30m). The middle point of the guidance was lowered more heavily for EBIT vs. net sales (net sales -4%, EBIT -12%). Profitability is negatively affected by the company’s adaptation measures which cause costs in the short term. The company’s customers’ decision-making on new investments continues to be cautious and the lower backlogs affect demand negatively for Etteplan’s engineering solutions related to project deliveries. The chemical industry in Germany was highlighted as one of the weaker end-markets, in line with the comments in Q2 report. In addition, we expect that for example Forest and Metals & Mining have stayed weak.
Magnitude of the profit warning was larger than expected
We previously estimated net sales of EUR 379.6m and EBIT of EUR 27.6m. While our estimate for EBIT was slightly below the previous guidance low (prev. EBIT guidance EUR 28-30m), the magnitude of the profit warning was larger than expected. We have revised our estimates downwards after the profit warning, we now model net sales of EUR 368.2m and EBIT of EUR 24.7m for 2024. We still anticipate net sales growth in H2, primarily due to inorganic growth in Software and Embedded. However, we have reduced our organic net sales forecasts. Despite the revisions, we consider the likelihood of another profit warning in 2024 to be quite low. We have also lowered our projections for 2025E, expecting that the current weaker market conditions will persist into early 2025.
BUY with a TP of EUR 13.5 (prev. EUR 14.0)
With the downward estimate adjustments, we revise our TP to EUR 13.5 (prev. EUR 14.0) while keeping the rating at BUY. Despite the estimate revisions, we see the valuation still rather undemanding for 2025-2026E (adj. P/E 11-10x, EV/EBITA 10-9x).