Solteq - Important profitability improvements
Solteq published preliminary Q2 figures, showing better profitability than we had estimated, while the sales continued to decline slightly, overall more on the positive side due to the current importance of profitability improvements in financing negotiations.
Profitability improvement and slight sales decline
Solteq published preliminary figures for Q2, showing a significant y/y profitability improvement but continued slight sales decline. The adj. EBIT amounted to EUR 0.0m (Q2/23: EUR -2.1m), above our estimate of EUR -0.6m. The comparable revenue declined by 1.5% y/y to EUR 13.4m, while we had expected a ~3% increase. Solteq further announced that it is considering commencing a written procedure to amend the terms and conditions of its EUR 23m senior unsecured fixed-rate notes, which are due on October 1st, 2024.
On good track to notably improve profitability during H2
The improved profitability, both q/q and y/y, is a positive especially with the maturing of its bond later this year. The cost base in Q2 should still be quite elevated due to costs relating to actions taken and savings not yet fully reflected. The adj. EBIT beat in Q2 compared with our estimates provides further confidence to the expected improved profitability level in H2, although we not made notable changes yet, while awaiting further clarity to the run rate of costs going forward. The comparable revenue decline was a slight disappointment, although the pace slowed down compared with Q1. Solteq still continues to expect that the comparable revenue will grow in 2024, which would require at least closer to middle single-digit growth during H2.
HOLD with a target price of EUR 0.75 (0.70)
In light of the improved profitability outlook, we fine-tune our target price to EUR 0.75 (0.70), HOLD-rating intact. Uncertainty remains high quite high with the market demand situation and financing risks, although the achieved profitability improvements alleviates some of the pressure on the latter.