Solteq - Toward softer landings in net sales
Solteq’s Q1 performance aligned with expectations. Profitability continued to improve y/y, driven by the Retail & Commerce segment, while net sales remained weak across both segments, though signs of gradual stabilization are emerging.
Profitability mixed, net sales remained weak across segments
Comparable Q1 net sales were EUR 12.1m (Q1'24: EUR 13.1m), just below our EUR 12.3m estimate. Sales declined across both segments, with Retail & Commerce seeing a 6.9% drop and Utilities down 8.2% y/y. Comparable operating profit was EUR 0.1m (Q1'24: EUR -0.3m), slightly below our EUR 0.3m estimate. In R&C, efficiency measures continued to pay off, with operating profit improving to EUR 0.7m, in line with expectations. Utilities’ operating profit was EUR -0.6m (Evli est. EUR -0.4m), marking a notably weak -21% EBIT margin, largely due to weak demand in the consulting business unit. On a positive note, recurring revenue in Utilities grew, now exceeding 50% of segment net sales.
Performance is expected to improve toward year-end
Solteq reiterated its guidance: the company expects net sales to decrease slightly (2024: EUR 48.8m excl. divested healthcare software business), while comparable operating result is expected to improve significantly (2024: EUR 0.7m). We expect a gradual pick-up in net sales over the year to support earnings growth. R&C profitability has stabilized around a healthy ~8% EBIT margin despite declining sales, but Utilities remains under pressure, with the consulting business in particular dragging down Q1 performance. The company expects the segment to improve toward year-end. Given the company’s rather limited cash reserves and elevated interest expenses, net sales improvement remains crucial to driving earnings growth.
ACCUMULATE with a TP of 0.65
We keep our estimates largely unchanged as the investment case remains intact. Based on our 2025–2026E estimates, Solteq trades at an EV/EBITDA of 8-5x, which we consider slightly undemanding, as we continue to see long-term potential supported by a gradually improving demand environment. We maintain our ACCUMULATE rating and target price of EUR 0.65.