Gofore - Slight weakness but still looking good

Gofore’s Q1 showed slight weakness y/y due to working day differences and lower billing rates due to changes in a customer’s deliveries, but overall progress remains good. With the recent share price rally, we lower our rating to HOLD (BUY), with a TP of EUR 21.0.

Slight weakness in relative profitability
Gofore reported Q1/21 net sales of EUR 25.2m (Evli EUR 23.5m), for a growth rate of 34.1% y/y, and adj. EBITA of EUR 3.5m (Evli 3.7m). The relative profitability was slightly lower than expected and lower than in the comparison period, with an adj. EBITA-% of 13.9% (Q1/20: 16.8%). This was due to the lower number of working days and changes in project deliveries relating to Gofore’s largest customer, which led to a lower than expected billing rate. On a general level, apart from the slightly weaker relative profitability, the Q1 report did not contain any noteworthy negatives, and customer demand appears to have continued to be at a healthy level.

Growth pace still set to continue strong
We expect net sales of EUR 103.2m and an adj. EBITA of EUR 14.3m in 2021, a y/y sales and adj. EBITA growth of 32.4% and 31.0% respectively. According to Gofore’s guidance the net sales and adj. EBITA are expected to grow in 2021 compared to 2020. Growth is mainly driven by the Qentinel Finland acquisition in September 2020 and the CCEA + Celkee acquisition in March 2021. Furthermore, we expect for Gofore to continue on its track of good organic growth and aided by a good order intake achieve double-digit organic growth figures. With the slight weakness in relative profitability in Q1 and potential further weakness in Q2 from the project delivery changes of Gofore’s largest customer we expect full-year margins to decrease slightly compared with 2020.

HOLD (BUY) with a TP or EUR 21.0
Gofore’s share price has rallied some 20% since our previous update in March. With our estimates and the investment case overall intact we retain our target price of EUR 21.0. With valuation pushing clearly above 30x 2021 P/E and ahead of peers we downgrade our rating to HOLD (BUY).

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