Etteplan - Not in the clear just yet
Etteplan's Q2 fell short of our estimates due to continued low customer activity. While the slower H1 creates pressure to meet the specified guidance, we continue to see the long-term prospects attractive.
Slow customer activity continued in Q2
Net sales in Q2 were EUR 92.6m (Evli est. EUR 98.0m, EUR 89.8m in Q2/23), revenue increased 3.1% y/y while we expected growth of 9.1% y/y. As expected, the growth was driven by acquisitions made during the second half of last year and the first half of this year. Organic net sales declined by 3.3% and revenue from key accounts decreased by 6.9%. Generally, the main reason for the slower than estimated net sales growth was Etteplan’s customers continued slower decision-making regarding new investments. Sectors such as industrial machinery, forest and metals and mining have remained challenging during 2024. For example, client order-related engineering has slowed down due to lower order intake in some of the beforementioned customer categories. With the slower than expected growth, EBIT in Q2 amounted to EUR 5.3m (Evli est. EUR 9.0m, EUR 6.1m in Q2/23), at a margin of 5.8% as the operational efficiency was at a moderate level.
Some work to do during H2 to meet the specified guidance
With the weaker H1, the company specified its guidance: revenue in 2024 is estimated to be EUR 375–390m (prev. EUR 375-415m) and EBIT 28–30m (prev. EUR 28-34m). After adjusting our estimates, we model net sales of EUR 379.6m (prev. EUR 386m) and EBIT slightly below the revised guidance low range at EUR 27.6m (prev. EUR 30m). We expect that the market will remain quite soft during the second half. While we estimate some market headwind to persist in H2, the company’s acquisitions made during 2024 will continue to drive growth for Software and Embedded coupled with the outsourcing agreements that will help Engineering Solutions.
BUY with a TP of EUR 14.0 (prev. EUR 14.5)
Despite the weak H1/24 creating pressure in the short-term, we continue to see the long-term case attractive. Etteplan is currently priced with a discount vs. peers on our estimates for 2025-2026E. Additionally, the current pricing presents a discount to the historical multiple levels and fair value derived from our DCF.