Etteplan - Difficulties persist

Profit warning due to market conditions and one-off costs

At the end of August, the company released its first profit warning of the fiscal year where it estimated its revenue for 2024 to be EUR 360-375, and EBIT to be EUR 24-27m. With the second profit warning released ahead of the Q3 print, revenue is estimated to be EUR 355-370m and EBIT to be EUR 18-22m. The negative market development has continued as the customers’ decision making regarding new investments remains cautious and order backlogs continue to decline. In addition to the continued challenging market, Etteplan has implemented adaptation measures across its service areas. The adaptation measures will cause significant non-recurring costs in 2024. In Germany, the company will terminate its Building Technology business which will cause costs and project write-downs. In addition, a salary entry related accounting error in Sweden will have a negative earnings impact for Q3/24. 

It will get worse before it gets better

The revised guidance midpoint slightly undercuts our prior net sales estimate, while the EBIT midpoint is nearly 20% lower than our previous projection. We have revised our estimates to match the updated guidance, we now estimate net sales of EUR 361.3m and EBIT of EUR 18.5m for 2024E. We expect a very weak Q3/24 due to the one-off costs. The adaptation measures across the service areas and almost all European operating countries prepare Etteplan for the new strategic period of 2025-2027. The new strategy will be published during December 2024. We expect that the company’s profitability will rebound in 2025E, driven by slimmed down organization and slowly improving market conditions. 

BUY with a TP of EUR 12.0 (prev. EUR 13.5)

Based on our revised estimates, Etteplan is trading at 7x EV/EBITDA for 2025E, which is roughly 10% below the current peer multiples. We lower our TP to EUR 12.0 (prev. EUR 13.5) while keeping rating at BUY.