Solteq - Limited visibility for sales recovery
Solteq’s Q4 results were weaker than expected. While the company maintained its profitability improvement trend in Retail & Commerce, net sales—particularly in Utilities—were disappointing. The near-term outlook for both segments remain weak, as reflected in the guidance.
Weaker-than-expected sales, R&C profitability holds
Solteq reported Q4 comparable net sales of EUR 12.5m (Q4’23: EUR 14.3m), missing our EUR 13.4m estimate and reflecting a 12.4% organic decline. Both segments saw revenue drops amid challenging market conditions. Retail & Commerce performed relatively better, while Utilities’ net sales plunged by 27% y/y due to weak customer demand amid challenging market conditions and delays in software deliveries caused by internal resourcing challenges. Efficiency measures taken in R&C supported profitability, driving the segment’s comparable operating profit to EUR 1.0m (Q4’23: EUR -0.2m), slightly above our EUR 0.8m forecast, contributing to an overall comparable operating margin of EUR 0.3m (Q4’23: EUR -1.0m, Evli est. EUR 0.8m). In contrast, Utilities recorded a comparable operating result of EUR -0.7m (Q4’23: EUR -0.8m) versus our EUR 0.0m estimate.
Delay in demand recovery affecting our 2025 estimates
Solteq’s 2025 outlook and guidance fell short of our expectations. The company estimates a slight decline in comparable net sales (2024: EUR 48.8m, factoring in the sale of Solteq Care) and a significant improvement in comparable operating profit. Management indicated that short-term conditions are expected to remain soft, though signs of gradual growth are emerging. As a result, we have revised our FY 2025E estimates for comparable net sales to EUR 48.7m and for the comparable operating margin to EUR 2.8m. We now forecast a 5% decline in sales for Retail & Commerce, driven mainly by the sale of Solteq Care, whereas previously we had estimated flat net sales development. Despite efficiency improvements, lower volumes are expected to weigh slightly on margins. For Utilities, we now expect a slight decline in sales, reversing our earlier expectation of some 5% growth. As a result, margin recovery for Utilities is anticipated to shift to 2026.
ACCUMULATE (BUY) with a target price of EUR 0.65 (EUR 0.75)
We revise our TP to 0.65. While the company has partially achieved its profitability turnaround, and the long-term outlook remain favourable, near-term visibility for a change in the current operating environment remains limited.