Netum - Near-term challenges continue
Netum issued a profit warning, lowering its EBITA-margin range. We see continued solid mid-term potential through the public sector exposure despite near-term challenges.
Lowered 2022E EBITA-% from 12-14% to 9-10%
Netum issued a profit warning on December 15th. The guidance for growth of over 30% in 2022 remains intact, while the EBITA-margin estimate was lowered from 12-14% to 9-10%. There is evidently no clear sole reason for the lowered guidance, but a product of among other things slightly below expected top-line growth, recruitments, additional expenses incurred from organizational restructuring during H2 and wage and general cost increases. Project challenges or delays have not been an issue. Growth and demand have to our understanding overall remained good despite some softness within the more competed for “general” projects and in private sector demand. The high share of public sector clients and related solid demand and better prerequisites for transferring cost increases to the customer remain beneficial.
Margin improvement potential in our view remains intact
With the lowered guidance we have lowered our 2022 EBITA-% estimate to 9.6% and our sales growth estimate by some 3%p. We continue to see clear potential for double-digit EBITA-margins and the long-term target of 14% not overly ambitious. Uncertainty regarding 2023 is elevated but assuming that the demand situation continues to support top-line growth and among other things the challenges with Netum’s Cyber security business ease and savings from the organizational restructuring and acquisition synergies materialize, we expect margins to improve to 13% in 2023. Netum has continued active recruiting and although profitability challenges will likely somewhat affect growth ambitions, we continue to expect double-digit growth.
BUY with a target price of EUR 4.2 (4.5)
Netum’s investment case in our view remains supported by the public sector exposure and good demand in the area and margin potential and we have yet to identify any major weaknesses. We retain our BUY-rating but lower our TP to EUR 4.2 (4.5).
Netum issued a profit warning on December 15th. The guidance for growth of over 30% in 2022 remains intact, while the EBITA-margin estimate was lowered from 12-14% to 9-10%. There is evidently no clear sole reason for the lowered guidance, but a product of among other things slightly below expected top-line growth, recruitments, additional expenses incurred from organizational restructuring during H2 and wage and general cost increases. Project challenges or delays have not been an issue. Growth and demand have to our understanding overall remained good despite some softness within the more competed for “general” projects and in private sector demand. The high share of public sector clients and related solid demand and better prerequisites for transferring cost increases to the customer remain beneficial.
Margin improvement potential in our view remains intact
With the lowered guidance we have lowered our 2022 EBITA-% estimate to 9.6% and our sales growth estimate by some 3%p. We continue to see clear potential for double-digit EBITA-margins and the long-term target of 14% not overly ambitious. Uncertainty regarding 2023 is elevated but assuming that the demand situation continues to support top-line growth and among other things the challenges with Netum’s Cyber security business ease and savings from the organizational restructuring and acquisition synergies materialize, we expect margins to improve to 13% in 2023. Netum has continued active recruiting and although profitability challenges will likely somewhat affect growth ambitions, we continue to expect double-digit growth.
BUY with a target price of EUR 4.2 (4.5)
Netum’s investment case in our view remains supported by the public sector exposure and good demand in the area and margin potential and we have yet to identify any major weaknesses. We retain our BUY-rating but lower our TP to EUR 4.2 (4.5).