Loihde - Steady progress amid uncertainty
Loihde’s Q3 beat our estimates, offset by expectations of a slower Q4. Growth in the main business areas continues to be favourable, while recovery in IT consulting is still awaited, and we see continued margin improvement potential.
Q3 results better than expected
Loihde’s Q3 results beat our estimates both in terms of growth and profitability. Net sales grew by 5% y/y to EUR 31.5m (Evli: 30.6m), with growth again driven by the Security Solutions and Cyber, Cloud & Connect business areas, while net sales declined in the Data & AI and Digital Services business areas. The adj. EBITDA amounted to EUR 2.9m (Evli: 2.3m), at a margin of 9.3% (Q3/23: 9.7%).
2025: expecting slightly faster growth, margin improvement
The third quarter was aided by revenue from security solutions projects being more front-loaded than in previous years, which together with the market situation results in a more cautious growth expectation for Q4. Our estimate revisions as such reflect the above estimated Q3 being largely offset by lowered Q4 estimates. Some additional uncertainty is seen in the sales of network equipment, which slowed down noticeably, and is seen to affect revenue generation in the short-term. For 2025 we continue to expect slightly accelerated growth (4.4%) and an improvement in the adj. EBITDA-margin to 8.7% (2024e: 7.6%). Loihde’s business relating to security solutions has grown well and the outlook remains favourable and growth has importantly been seen also in continuous services, that generate better predictability and margin potential. We remain cautious of the recovery in IT consulting, with yet no signs of significant improvement, but a recovery would provide a smaller boost to growth and subsequent improvements in billing rates a comparatively larger increase in profitability.
BUY-rating with a target price of EUR 12.2
With no larger changes to our estimates, we retain our target price of EUR 12.2, BUY-rating intact. Valuation compared with peers when looking at 2025e P/E (Loihde adj. P/E ~15x) is stretched, while clearly below peers on EV/EBITDA and EV/Sales. Our assumptions are on the cautionary side for next year, but potential for notable improvements under more normal market conditions remain in place.