Etteplan - Slow start for the year
Etteplan posted softer than expected figures for Q1 that were further weakened by sizeable NRIs. What initially appeared to be a rather conservative guidance at the start of the year now seems more challenging, although softer comparable figures and the company’s continued self-help provide some backing.
Weaker than expected across the board in Q1
Net sales in Q1 were EUR 94.9m (Evli est. EUR 100.2m, EUR 97.1m in Q1/24), revenue decreased by 2.3% as organic net sales decreased by 8.0% (at comparable FX). Development was weaker than we expected in both Software and Embedded and Engineering Solutions. Operating profit fell to EUR 4.2m (Evli est. EUR 6.1m) due to lower net sales and non-recurring items. The combined effect of NRI’s to EBITA and EBIT was EUR -1.3m, excluding these, EBITA-margin was at 7.5% (Evli est. 8.1%). NRI’s were related to adaptation measures, acquisition of Novacon and a significant credit loss in Germany.
Growth should accelerate in H2 against weaker comparable
With the softer Q1, Etteplan specified its guidance for 2025 as it now expects net sales to land in between EUR 365-395m (prev. EUR 365-400m) and EBIT to EUR 23-28m (EUR 23-30m). After estimate revisions, we now model net sales of EUR 375.6m (prev. EUR 385.0m) and EBIT of EUR 23.3m (EUR 25.4m) for 2025E. We find the organic growth drivers for Q2 limited as the market remains challenging, headcount has decreased for Software and Embedded and there is one less working day in Finland. We anticipate stronger organic sales growth in the second half of the year, largely due to weaker comparable figures, as Engineering Solutions sales saw a nearly 9% year-on-year decline in H2/24. However, we do not expect any sudden improvement in market conditions. Although the escalation of the trade war has delayed certain investment decisions, the company has not been required to implement additional efficiency measures. Furthermore, several customer segments, including energy, automotive, and defense, continue to perform well. Meanwhile, acquisitions remain a key driver of sales growth for Engineering Solutions, and we expect continued self-help to contribute to profitability. While we still expect Etteplan to reach its guidance, the likelihood of a profit warning has increased due to the slower start to the year and continued uncertain demand picture.
ACCUMULATE with a TP of EUR 11.5 (prev. EUR 12.0)
After estimate revisions, Etteplan is priced at adj. EV/EBITA of 11-10x and adj. P/E of 13-11x for 2025-2026E. The pricing is neutral on both relative and absolute terms in the short-term. While short-term upside is limited, we continue to consider the long-term case attractive should the turnaround develop according to our estimates during the coming years.