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Etteplan - Continued improvement

Etteplan’s Q3 results on group level were quite in line with our estimates. Engineering services and Embedded Systems and IoT continued to improve, while Technical documentation saw continued problems in Germany. The market outlook remains favourable albeit with increased uncertainty. We retain our BUY-rating with a TP of EUR 9.5 (10.0).

Continued improvements

Etteplan’s Q3 results were on group level quite in line with our expectations. Revenue amounted to EUR 52.6m (Evli EUR 54.5m) and EBIT from business operations EUR 4.8m (Evli EUR 4.7m). Engineering services continued on a very good track, with sales growth of 11.4 % and an EBIT BO margin of 10.0 %. The measures to improve profitability in Embedded Systems and IoT have shown results and the EBIT BO margin increased to 9.8 % (7.4 % in Q3/17). Technical documentation was weighed down by continued challenges in Germany, with the EBIT BO margin at 8.0 %.

Market outlook remains favourable, increased uncertainty

No major changes were noted in the market outlook, although uncertainty has increased, and Etteplan expects a favourable end of the year. We have not made any major changes to our estimates. We remain cautious to improvements in profitability in Engineering services due to already solid levels. We expect improvement in Technical documentation as the problems in Germany appear to have been alleviated. Embedded Systems and IoT has seen improvements but still lies below previously achieved levels. The availability of professionals in the area is limiting growth and we see continued M&A activity in the area as likely. Our 2018 net sales and EBIT BO estimates are EUR 239.5m and EUR 22.9m respectively.

BUY with a target price of EUR 9.5 (10.0)

Etteplan trades on a ~20 % and ~15% discount on 19E EV/EBITDA and P/E, which we do not consider as justifiable. We retain our BUY-rating with a target price of EUR 9.5 (10.0)

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