Solteq - Profitability recovery priority in 2026
Solteq returned to organic growth in Q4, but profitability remained weak. 2026 is a bridge year, with focus on turning the profitability around.
Return to growth, earnings yet to recover
Solteq's Q4 comparable net sales grew 1% to EUR 12.1m, exceeding our estimate and marking a return to organic growth. However, comparable operating result of EUR 0.5m came in line with our forecast, leaving the comparable operating margin at 4.1%. Utilities drove the top-line beat with revenue up 16% from an easy comparison base. Despite this momentum, the segment posted comparable operating result of EUR -0.3m as revenue growth failed to translate to profitability. Retail & Commerce followed its familiar trajectory as comparable net sales declined slightly (-4%) but comparable operating result of EUR 0.8m delivered a resilient 9.4% margin. We view this as a decent performance given the current cautious operating environment especially in R&C.
2026 will be another bridge year
With cost-saving measures implemented in both segments, profitability is set to improve significantly in 2026, though net sales development remains a concern. This is reflected in Solteq's guidance, which expects comparable revenue to remain at 2025 levels while comparable operating result improves clearly. Following minor revisions, we estimate FY2026 net sales of EUR 46.8m (+0.4%) and adjusted EBIT of EUR 3.0m. By segment, we expect R&C sales to remain essentially flat while Utilities turns to low single-digit growth. On profitability, Q1 should see some improvement in Utilities from recent efficiency measures, offset by one-off costs of around EUR 0.4m from recently announced change negotiations across both segments. From Q2 onwards, we estimate profitability in both segments will start improving as cost-saving measures take effect. With financial expenses remaining high, profitability improvement is critical just to cover financing costs. While the Q4 revenue beat was encouraging, sustained top-line growth appears to be a 2027 story with no clear jump in revenue yet visible.
ACCUMULATE with a TP of EUR 0.45
Solteq is valued neutrally on our 2026E estimates at EV/EBITDA of 7x in both absolute and relative terms. However, continued margin improvement into 2027 and beyond offers upside to peer median multiples. We keep our TP of EUR 0.45 and ACCUMULATE rating.