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- Solteq - Minor bumps, narrative unchanged
Solteq - Minor bumps, narrative unchanged
Estimates miss from project postponements
Solteq’s Q3 results fell short of our as well as company expectations. Revenue in Q3 grew 1.2% to EUR 13.0m (Evli 13.5m) and EBIT amounted to EUR 0.3m (Evli 0.7m). The third quarter was impacted by the postponement of certain customer projects to the fourth quarter, with the value of a single postponed order at more than EUR 0.3m. Aside from the impact of the postponed projects the Q3 results provided no surprises. Solteq noted a continued positive development of its order backlog.
Plans to change segment structure during 2020
Solteq announced intentions to change its segment structure during 2020 into two business segments: Solteq Software and Solteq Digital. Solteq Software will focus on the company’s own products and Solteq Digital on IT expert services. The long-term financial targets for Software/Digital are: minimum average annual revenue growth 20%/5% and minimum EBIT-margin 25%/8%. For some perspective, this could imply Group EBIT-margins well over 10% by 2022.
HOLD with a target price of EUR 1.50
We have lowered our 2019 net sales and EBIT estimates to EUR 58.3m (prev. 58.9m) and EUR 3.9m (prev. 4.4m), with only minor adjustments to our coming year estimates. Solteq as an investment case relies on the transition towards own software and related services and some positive signs were seen from order inflow during Q3, although not large enough to warrant changes to our views. With our estimates largely intact we retain our HOLD-rating and target price of EUR 1.50.