Etteplan - Navigating through the storm
Etteplan’s Q3 was weak as was expected after the two profit warnings the company gave prior to the report. Despite the short-term market led weakness, we continue to see the long-term prospects attractive at the current valuation.
Hard to find positives from the Q3 report
The weakness of Etteplan’s Q3 came as no surprise as the company released two profit warnings before the Q3 print. Net sales in Q3 were EUR 80.0m (Evli est. EUR 79.6m, EUR 80.0m in Q3/23), revenue was flat compared to last year helped by inorganic growth, in line with our estimates. EBIT in Q3 amounted to EUR 1.4m (Evli est. EUR 1.8m, EUR 5.0m in Q3/23), at a margin of 1.8%. The combined effect of NRI’s on EBITA and EBIT was EUR -1.4m for the quarter. Additionally, a negative impact of EUR -0.8m was due to the correction of an accounting error in Sweden. The accounting error was related to too low salary bookings during the year. The segment figures for Q3 were roughly in line with estimates, yet Engineering Solutions was clearly softer than expected as the NRIs and the accounting error correction impacted the segment more than we had estimated (EUR -1.7m effect).
No help from the market in the short-term
With the second profit warning released ahead of the Q3 print, revenue is now estimated to be EUR 355-370m and EBIT to be EUR 18-22m for 2024. Our estimates remain largely unchanged, projecting net sales at EUR 362.9 million and EBIT at EUR 18.4 million. We expect no help from the market in Q4 as we forecast organic sales decline to persist while Software and Embedded growth continues to be driven by acquisitions. The demand seems weak throughout most of the customer industries as also the investments related to energy efficiency and green transition slowed during Q3. We still estimate growth for 2025E as we model net sales of EUR 375.4m with growth of 3.5% y/y predominantly coming from organic sources. With the higher expected net sales, we forecast EBIT of EUR 26.4m at a margin of 7.0%. The consensus estimates point towards slight growth for some of Etteplan’s largest customers for 2025E vs. flat sales expected on average for 2024E.
BUY with a TP of EUR 12.0
Etteplan is priced at 7x EV/EBITDA and 12x adj. P/E based our estimates for 2025. We continue to see the pricing rather undemanding. It offers a significant discount compared to the company's historical multiples, while appearing relatively neutral compared to the peer group multiples.