Solteq - Market challenges hinder turnaround pace
Solteq’s FY 2024 showed encouraging signs of a turnaround, with the company’s transition from a traditional IT-services provider to a vertical software company gaining momentum. While long-term potential remains, market headwinds continue to cloud the outlook.
IT-services company in transition toward vertical software
Solteq is a Nordic IT-services and vertical software provider specializing in digital business solutions for the energy, retail, and commerce sectors. In recent years, the company has streamlined its offering, moving from a broad IT-services focus to an industry-specific, software-driven approach across two core segments: Retail & Commerce and Utilities. Solteq supports customers throughout the entire digital lifecycle – from service design to implementation and maintenance. With around 400 employees, the company operates in the Nordics, the UK, and Poland, though Finland accounts for over 80% of revenue.
Turnaround expected to continue in 2025
Following a period of profitable growth during the pandemic, when increased IT investments drove demand, Solteq’s performance weakened due to deteriorating macro conditions and internal product development issues in the Utilities segment. In response, the company launched a revised strategic plan at its 2023 CMD. Early signs of progress were visible in 2024 as cost-saving measures returned the company to a (slightly) positive operating result. However, demand remains soft and financing costs elevated. Accelerating the turnaround remains critical, with the Utilities segment’s product business viewed as the key driver for future scalability and improved financial resilience. For 2025, Solteq expects a slight decline in comparable revenue, while significantly improving comparable profitability. We estimate FY 2025 net sales of EUR 48.7m (-0.3% y/y in comparable terms) and a comparable operating profit of EUR 2.5m, implying a margin of 5.1%, up from 1.4% in 2024.
ACCUMULATE with a TP of EUR 0.65
We maintain our target price of EUR 0.65 and ACCUMULATE recommendation. Based on our 2025–2026 estimates, Solteq trades at 8x-5x EV/EBITDA and 0.7x-0.6x EV/sales. The 2025 valuation is rather neutral, while the 2026 valuation appears attractive, trading below the peer group. The upside remains significant, should the turnaround continue to gain momentum.