Solteq - Some continued softness seen

Some softness expected in Q4
Solteq reports Q4 results on February 17th. Solteq’s Q3 results were softer than anticipated, as deliveries for two large-scale retail customers were postponed as a result of the impact of the global component shortage. Revenue still grew by over 10%, mainly organically, and the adj. operating profit margin was at a fairly decent 8.1%. We had previously expected fourth quarter figures to turn back on track with the start-up of the postponed projects. With the macroeconomic uncertainties still present we anticipate some softness to still be seen in the fourth quarter and have slightly lowered our estimates, still expecting fairly good growth but slightly lower margins y/y.

Potential remains but market uncertainties a disturbance
Solteq in our view remains in a good position to continue revenue and earnings growth in 2022. We anticipate the recurring revenue from the implemented Utilities business projects to start to show. We see that the demand for Solteq’s solutions, in particular within utilities and ecommerce, should under normalized circumstances remain at a healthy level. The market environment has however been somewhat challenging and has not appeared to improve significantly going into 2022. With the current uncertainties we have lowered our 2022e EBIT estimates by some 9% but still see room for double-digit y/y growth in operating profit. We expect revenue of EUR 76.3m and an adj. operating profit margin of 13.8%.

BUY with a target price of EUR 6.2 (6.8)
With our estimates revisions and current uncertainties, we adjust our TP to EUR 6.2 (6.8) and retain our BUY-rating. Our TP values Solteq at ~17x 2022 P/E, which is still fairly low, and upside potential remains solid should the market environment not threaten the earnings growth track.