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- Solteq - Steaming ahead
Solteq - Steaming ahead
Clear earnings beat across the board
Solteq reported solid Q1 figures, clearly beating our estimates. Net sales grew 10.9% to EUR 17.4m (Evli 16.5m) and EBIT improved to EUR 2.2m (Evli EUR 0.9m). A clear highlight for the first quarter was the mainly organic 43.1% growth of Solteq Software, aided by deliveries of the orders received within the Utilities business. The profitability figures of Solteq Digital were surprisingly good, with EBIT doubling compared to the comparison period, to our understanding mainly driven by high utilization rates and streamlining of operations. Solteq upgraded its profitability guidance ahead of Q1, now also expecting the operating profit to grow clearly (prev. grow). This was not too surprising, as we had already in conjunction with Q4 questioned the guidance softness.
Estimates raised quite a bit
We have clearly raised our estimates after the solid first quarter figures. We now expect revenue growth of 13.0% (prev. 8.9%), driven mainly by Solteq Software and customer deliveries in the Utilities business. We expect pick-up in growth of Solteq Digital in the latter half of the year, as easing of the pandemic should increase demand in some of the harder hit sectors. We have also raised our EBIT estimate to EUR 9.2m (prev. 6.7m). We see limited margin upside potential going forward in the less scalable Solteq Digital segment while Solteq Software still has a lot more potential once the recurring revenue from the deliveries now being made start ramping up.
BUY with a target price of EUR 7.2 (4.5)
Solteq has seen a rather hefty share price rally in the past year, being up over 400%. On our revised estimates valuation for the “new” Solteq still does not appear overly challenging. We raise our target price to EUR 7.2 (4.5), valuing Solteq at 24x 2021 P/E and retain our BUY-rating.