Solteq - Showing promising progress

Name: Evli
Price range: $

Solteq’s Q2 results were slightly better than our expectations, with net sales at EUR 14.7m (Evli 14.4m) and EBIT at EUR 0.6m (Evli 0.5m). The report mostly implied business as usual, with encouraging comments on order intake development. We have made minor estimates revisions, now expecting a 2019 EBIT-margin of 7.4% (prev. 6.8%). We raise our target price to EUR 1.5 (1.4) and retain our HOLD-rating.

Q2 slightly better than expected

Solteq posted Q2 results slightly better than our expectations. Net sales amounted to EUR 14.7m vs. our estimate of EUR 14.4m. Growth picked up slightly in Q2, at 3.0% y/y, with the revenue of the international subsidiaries having grown significantly. The order intake has according to the company continued to develop positively and was larger than in the comparison period. Q2 EBIT amounted to EUR 0.6 vs. our estimate of EUR 0.5m. Product development investments grew to EUR 1.1m (0.6m), with the co’s full year estimate still at EUR 3.5m.

Slight upwards revisions of our estimates

We have made only minor adjustments to our estimates post-Q2. We expect sales in 2019 to grow 3.5% to EUR 58.9m, supported by a favourable order intake development and expect continued solid growth internationally. We expect the operating profit margin in 2019 to improve to 7.4% (prev. est. 6.8%) from 4.3% in 2018, driven by the actions taken to improve operational efficiency during 2018. Solteq has guided for its operating profit in 2019 to grow clearly compared to 2018.

HOLD with a target price of EUR 1.5 (1.4)

On 2019 peer multiples valuation still appears reasonably fair. Although we are not yet prepared to fully emphasize 2020 multiples, with the good progress so far during the year and our slightly raised estimates we raise our target price to EUR 1.5 (1.4) and retain our HOLD-rating.

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