Innofactor - Growth pace uncertainty

Q4 well in line with our expectations
Innofactor reported Q4 results, which were well in line with our estimates. Net sales amounted to EUR 21.9m (Evli EUR 22.1m), growing 6.8% y/y. EBITDA amounted to EUR 2.9m (Evli 2.9m), at a margin of 13.1%. The order backlog stood at EUR 71.6m, down 5.6% y/y, with parts of the backlog transferred to the framework agreement backlog (2023: EUR 29.8m). Innofactor’s BoD proposed a distribution of EUR 0.07 per share (Evli EUR 0.07) and Innofactor expectedly rolled over the previous guidance to FY2024, expecting net sales and EBITDA to grow compared with the previous year.

Some uncertainty but good potential heading into 2024
Innofactor’s Q4 came with no larger surprises. The challenges posed by price competition are expected to continue going into 2024, although the weighted average prices of new agreements have increased slightly y/y. With the uncertainty going into the year we for now estimate slower growth, expecting a 4.4% y/y increase in 2024, with further positive signs relating to new sales needed during H1. Innofactor started reporting key figures for its solutions areas, with Information and Case Management solutions (including the Dynasty solutions) having been the driver for growth and profitability in 2023. With market saturation in Finland, a successful rollout in other Nordic countries could provide notable earnings upside. All in all, we consider Innofactor’s position as rather favourable at the moment despite market headwinds. 

BUY with a target price of EUR 1.5 (1.4)
We retain our BUY-rating with a target price of EUR 1.5 (1.4), valuing Innofactor at ~11x 2024e P/E. Should the caution regarding early 2024 brought by market uncertainty be unwarranted, valuation levels close to that of the peer median would in our view be justified.