Solteq - Gradual improvement expected

Comparable y/y net sales development still in the red

Solteq is set to report Q2 results this Thursday amid a Finnish IT services market that remains sluggish due to economic uncertainty and customer cautiousness, as suggested by peer reports and management commentary. We estimate net sales of EUR 12.6m, down 6% y/y, primarily reflecting the impact of the divested Danish healthcare software business, with comparable revenue expected to decline 2%. The company should be able to moderate the pace of decline across both segments. In Retail & Commerce we expect comparable revenue to decline by around 1%, while Utilities is expected to decline 5% y/y.

Profitability is expected to improve in Q2

Following five consecutive quarters of y/y operating result improvements, supported by cost-saving initiatives implemented in 2024, we expect EBIT in Q2 to improve to EUR 0.5m (Q2'24: EUR 0.0m), translating to a 4.0% margin. This improvement is expected to come mainly from R&C, which have become the profitability anchor, delivering healthy margins despite declining sales and the divestment of the more profitable healthcare software business. Utilities, after a substantial Q1 hit, appears on track for a gradual recovery based on management expectations and with recurring SaaS revenue continuing to improve. The segment has significant potential, although the turnaround has taken longer than expected.

ACCUMULATE with a TP of EUR 0.65

Solteq trades at a slight discount to peers on 2025E EV/EBITDA multiples, as peer group multiples have increased recently. The valuation discount widens on 2026E estimates, reflecting longer-term recovery potential. However, visibility on the full-scale Utilities turnaround remains limited, requiring more concrete evidence of sustained recovery. We maintain our ACCUMULATE rating and target price of EUR 0.65.