Etteplan - More than just an engineering company

Etteplan has seen favourable development in the past few years following improving market conditions. Market uncertainty has increased recently and we expect organic growth figures to slow down going in to 2019. Acquisitions remain essential in achieving the 15 % average growth target. Margins are close to the 10 % EBIT from business operations target, under some pressure but with room for improvements. We retain our BUY-rating with a target price of EUR 9.0 (9.5).

Market uncertainty casting a shadow on sales growth

Etteplan’s revenue in 2017 and during Q1-Q3/2018 increased by 16.8 % and 11.1 %, of which organic growth amounted to 10.4 % and 7.6 %, supported by improved market conditions from early 2017 onward. With some uncertainty relating to market development visible we expect organic growth to slow down going in to 2019 and achieving the target of an average growth of 15% would in our view require further acquisitions.

Margins near 10 % target

Etteplan has during 2018 been able to achieve group EBIT from business operations margins of close to the 10 % target (9.1 % during Q1-Q3/2018). A key driver for profitability has been Engineering Services due to the good demand situation and improved operational efficiency. We see some pressure on the already exceptionally good margins in the service area, while Embedded Systems and IoT as well as Technical Documentation in our view still have room for margin development.

BUY with a target price of EUR 9.0

Compared to peer 2019E and 2020E multiples Etteplan trades at a discount. Increased uncertainty in coming years market development warrants some caution but the ’19- ‘20E discount of ~20 % to peer ‘19E and ‘20E EV/EBITDA does not appear justified. We value Etteplan at 8.8x 2019E EV/EBITDA, giving a target price of EUR 9.0 (9.5) and BUY recommendation.

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