Solteq - Expecting recovery after weaker H1
Solteq will report Q3 results this Wednesday, October 29. The company’s turnaround was prolonged during H1 amid a challenging market. In Q3, we expect both segments to show some improvement after the setback.
Some signs of a more favorable market environment
Solteq’s first half of the year was disappointing, with the Utilities segment weighing heavily on results as weak business consulting activity limited sales and pressured margins. The Retail & Commerce segment performed reasonably well given the challenging market conditions, with revenue only declining moderately in comparable terms and profitability supported by earlier cost savings. Market commentary in connection with Q2 remained cautious, but there are some signs of improvement toward year-end. Consumer confidence has recovered slightly, suggesting slowly improving sentiment in the broader economy. Also, domestic public peers have reported stronger Q3 results and a slightly more positive outlook than during H1. Overall, both market sentiment and Solteq’s own guidance point to a somewhat better second half.
Q3 to show roughly flat comparable revenue and EBIT y/y
We expect Q3 results to show slight improvement relative to the H1 setback and expect comparable revenue in both segments to be roughly flat y/y. In R&C, we estimate comparable EBIT in Q3 to be roughly in line y/y at EUR 0.6m (7.5% margin), maintaining solid profitability supported by cost savings. In Utilities, we anticipate EBIT to remain negative at EUR -0.1m (-3% margin), but also to be on par y/y, compared to a 20% y/y decline in H1. We expect the segment’s higher relative share of recurring revenue to provide stability in Q3 compared to H1. Although market conditions appear to have improved marginally, uncertainty remains high, and we make no estimate changes ahead of the release. Our estimates for 2025E remain unchanged at comparable net sales of EUR 47.7m and comparable EBIT of EUR 1.5m (3.1% margin).
ACCUMULATE with a target price of EUR 0.62
Solteq trades roughly in line with Nordic IT service peers on 2025E EV/EBITDA of 9x, with clear upside emerging on our estimates for 2026E–27E. The company’s resilience in R&C offers some stability, but a sustained recovery still hinges on improving performance in Utilities. High financing costs add pressure to near-term profitability and uncertainty about the pace and scale of the turnaround is considerable. We keep our ACCUMULATE rating with a target price of EUR 0.62.