Solteq - Visibility for Utilities turnaround limited
Solteq’s Q2 result was below our expectations. Retail & Commerce was decent, while Utilities remained the weak spot, with both the segments net sales and operating result declining from the comparison period.
Q2 below expectations, mainly due to the Utilities segment
Solteq’s Q2 net sales came in at EUR 12.2m (Q2’24: EUR 12.1m), down -9.3% in comparable terms and -5.5% organically, missing our EUR 12.6m estimate as both segments fell short by EUR 0.2m. Comparable operating profit was EUR 0.1m, slightly above last year but below our EUR 0.5m estimate. In R&C, demand continued to be weak with investment decisions postponed, leaving sales under pressure, although profitability continue to hold up with comparable operating profit of EUR 0.7m (7.6% margin). The Utilities segment remained the main drag as consulting activity was softer than expected again, leading to a net sales decline of 9.9% y/y and operating profit of EUR -0.6m (-20.8% margin).
Better second half expected, but outlook remains cautious Solteq reiterated its guidance, expecting comparable net sales to decrease slightly from 2024 (EUR 48.8m) while comparable operating profit is expected to improve significantly (EUR 0.7m). We see limited visibility for a turnaround in sales, as both segments continue to show weak momentum and market conditions remain difficult, although we expect H2 to be somewhat stronger in comparable terms. Q3 benefits from stable recurring revenue and a lower cost base, while Q4 should improve against an easy comparison period given last year’s setbacks in Utilities. However, uncertainty around new projects remains high, profitability issues in Utilities persist, and with limited cash reserves and high interest expenses, sustained improvements are crucial. We have lowered our estimates and now expect FY 2025 net sales of EUR 47.7m (prev. 48.6m) and comparable operating profit of EUR 1.5m (prev. EUR 2.4m).
ACCUMULATE with a TP of EUR 0.62 (prev. EUR 0.65)
Following our estimates revisions, we lower our target price to EUR 0.62 (prev. EUR 0.65) and keep our accumulate rating. Solteq trades at 10–6x EV/EBITDA on 2025–2026E, a rather neutral level considering the long-term potential and current headwinds. R&C provides a stable base, but improvements in Utilities are needed, and with only modest near-term upside we retain a fairly neutral stance.