Solteq - Challenging outlook, earnings set to improve
Solteq reports Q4 figures on February 12. Despite a December guidance cut and change negotiations announced in January, we expect Q4 comparable operating profit to have improved modestly, while sales to have declined y/y.
Lowered guidance and announced change negotiations
Solteq lowered its comparable operating result guidance in December to remain at the same level or improve (prev. improve significantly), while maintaining its net sales guidance of a slight decrease. The company also announced change negotiations in January affecting up to 40 employees, and targeting EUR 2.1m in annual cost savings to right-size operations amid prolonged weak customer demand and delayed decision-making in new customer projects. In Utilities, improved productization has reduced labor needs, while Retail & Commerce is being restructured to match market demand. Despite the profit warning and restructuring, we expect Q4 to be the most resilient quarter of the year, with comparable net sales of EUR 11.6m (-3% y/y) and comparable operating result of EUR 0.5m. We estimate net sales for both R&C and Utilities to have declined by 3% y/y, with comparable EBIT of EUR 0.8m for R&C and EUR -0.3m for Utilities.
Cost savings critical, but return to growth still key
Looking ahead to 2026, the restructuring should provide earnings support of some EUR 2m annually, which is crucial given financing costs of around EUR 0.45m per quarter related to the company’s outstanding bond, with refinancing negotiations expected in H1. We expect one-off costs in Q1, with savings materializing from Q2 onwards, but cost-cutting alone is not a long-term solution and a sustainable improvement requires revenue growth, which remains challenging amid market weakness. While Utilities’ productization gains are encouraging, new customer wins are essential for top-line push and sustainable earnings growth. Our revised 2026E estimates of EUR 46.2m in net sales and EUR 3.0m in comparable operating profit (prev. EUR 47.5m & EUR 3.4m) reflect lower net sales expectations, partly offsetting the restructuring benefits.
ACCUMULATE with a TP of EUR 0.45 (prev. EUR 0.52)
Solteq trades below peer median at 6–5x EV/EBITDA on our 2026–27E estimates. Planned cost savings should support earnings and improve turnaround visibility, but a sustained recovery still depends on improvements in Utilities and a top-line recovery. Given the strained balance sheet and high financing costs, we remain cautious. We keep our ACCUMULATE rating but lower our TP to EUR 0.45 (prev. EUR 0.52).