A growth focused engineering services company
Despite a below expectations Q4, at least partly due to increased sickness-related absences, we see slightly improving expectations for 2023. We adjust our target price to EUR 16.0 (15.0), HOLD-rating intact.
Q4 fell short of expectations
Etteplan reported Q4 results below expectations. Revenue grew 6.8% (organic 1.0%, org. const. FX 2.8%) to EUR 91.0m (EUR 99.0m/98.0m Evli/cons.) while EBIT came in at EUR 8.4m (EUR 8.9m/9.0m Evli/cons.). Growth was affected by a high level of sickness-related absences. On a service area level Engineering solutions continued solid performance. Software and Embedded Solutions saw good improvements in profitability from actions previously taken to enhance operational efficiency. Technical Documentation Solutions saw lower profitability due to below expectations performance of the in 2022 acquired Cognitas. The BoD proposed a dividend of EUR 0.36 (0.32/0.34 Evli cons.).
2023 expectations rather decent despite headwinds
Considering the below expectations Q4, Etteplan’s 2023 revenue guidance (EUR 360-390m) is slightly better than we expected, with our pre-Q4 estimates at the guidance range mid-point. The EBIT guidance of EUR 28-33m was slightly below expectations on the mid-point. Our 2023 estimates are essentially unchanged, revenue expectations at EUR 375.3m and EBIT at EUR 31.5m. Margins are under pressure through wage inflation, but we continue to earnings improvement potential through improved operational efficiency in Software and Embedded Solutions and Technical Documentation Solutions while also assuming decent prerequisites to transfer inflation to prices. Further M&A activity also provides good potential for more rapid growth.
HOLD with a target price of EUR 16.0 (15.0)
Despite elevated uncertainty and cost inflation and a more recent slow-down in recruitments having an impact, the outlook going forward still generally appears quite favourable and Etteplan further noted a positive development direction of market sentiment. We adjust our TP to EUR 16.0 (15.0), valuing Etteplan at ~17x 2023e P/E, HOLD-rating intact.
Etteplan's net sales in Q4 amounted to EUR 91.0m, below our estimates and below consensus (EUR 99.0m/98.0m Evli/cons.). EBIT amounted to EUR 8.4m, below our estimates and below consensus (EUR 8.9m/9.0m Evli/cons.). Dividend proposal: Etteplan proposes a dividend of EUR 0.36 per share (EUR 0.32/0.34 Evli/Cons.).
Etteplan reports its Q4 results on February 17th. Sights are already set on the outlook for 2023, with our expectations being on a notable y/y slow-down in growth.
Etteplan’s operative performance was good in Q3 although bottom-line figures were weaker than expected. The market outlook appears to be taking some toll on growth ambitions and uncertainty is increasing. We lower our rating to HOLD (BUY) with a target price of EUR 13.5 (15.0).
Operatively good quarter, bottom-line below estimates
Etteplan reported operatively good Q3 results. Net sales in Q3 were EUR 80.3m (EUR 78.1m/78.4m Evli/Cons.), with growth of some 20% y/y (12.0% organic excl. FX). EBIT amounted to EUR 5.8m (EUR 4.7m/5.2m Evli/cons.) and some EUR 6.5m excl. one-offs (Evli EUR 5.7m). Bottom-line figures were below our expectations, as financial items relating to the Semcon offer were clearly larger than anticipated. As a result, despite the better operating performance, EPS was negative at EUR -0.03 (EUR 0.04/0.01 Evli/cons.). Etteplan adjusted it guidance, expecting revenue of EUR 345-360m (340-370m) and EBIT of EUR 28-31m (28-32m).
Taking growth ambitions down a notch
Etteplan’s comments related to the market outlook were slightly on the negative side. Further softness is seen in China and Etteplan has also pre-emptively taken a more conservative approach to recruitments. Expectations are still good for the remainder of the year and signs of a significant decline in demand remain somewhat limited, although fluctuations in different customer segments are high and visibility going forward is lower. Our 2022 operative estimates are slightly up given the better than anticipated Q3 figures, currency hedging still poses a risk for the bottom line. We have also slightly lowered our estimates for the coming years based on an anticipated slow-down in growth.
HOLD (BUY) with a target price of EUR 13.5 (15.0)
Uncertainty going forward is clearly increasing, and although we for now do not see a reason to interpret the company’s comments in Q3 as indicative of any major downswing, some added caution is warranted. We lower our TP to EUR 13.5 (15.0) and our rating to HOLD, valuing Etteplan at ~14.0x 2023e P/E.
Etteplan's net sales in Q3 amounted to EUR 80.3m, slightly above our and consensus estimates (EUR 78.1m/78.4m Evli/cons.). EBIT amounted to EUR 5.8m, above our estimates and above consensus estimates (EUR 4.7m/5.2m Evli/cons.). Guidance for 2022 specified: revenue EUR 345-360m (EUR 340-370m) and EBIT 28-31m (EUR 28-32m).
We revise our estimates due to the financial impact of the unsuccessful Semcon acquisition and accordingly lower our target price to EUR 15.0 (18.0).
One growth leap came to an end
Etteplan’s ambitions to acquire Semcon through a public offer were halted earlier in October after a competing offer came in from Ratos AB. Etteplan had announced that the offer price would not be increased, and the offer ended as Etteplan’s offer was not accepted to an extent that would have enabled ownership of more than 90% of outstanding shares. One-time costs related to the preparation of the transaction are booked in the third quarter of the current year. The financial guidance for 2022 remains unchanged, with revenue estimated to be EUR 340-370m and EBIT EUR 28-32m. Currency hedging risks relating to the transaction will have a significant negative impact on Q3 EPS and the final effect is recorded in Q4.
2022 earnings impacted by one-offs relating to the offer
The unsuccessful offer is unfortunate given our assessment of the mid- and long-term potential of the combined companies and the associated costs will weigh on 2022 financials. We have revised our 2022 EBIT estimate to EUR 28.2m (prev. EUR 29.2m) based on the perceived transaction costs and EPS to EUR 0.74 (prev. EUR 0.90), with our adj. EPS estimate still at EUR 0.90. The one-offs have increased profit warning risks for H2 should market conditions deteriorate but on the other hand, with the guidance still intact, slight added confidence is provided for the level of operative performance.
BUY with a target price of EUR 15.0 (18.0)
With the offer for Semcon not being successful we adjust our target price to EUR 15.0 (EUR 18.0) based on the perceived missed out value creation potential. Continued market uncertainty has further had a slight impact on peer multiples. Our TP values Etteplan at ~16.5x 22e adj. P/E, above the peer median given Etteplan’s historical and anticipated performance but below recent year historical averages due to the market outlook. We retain our BUY-rating.
Etteplan announced a recommended cash offer for Swedish technology company Semcon. The transaction would strengthen the market position and appears favourable for shareholders of both companies. We adjust our TP to EUR 18 (16) and upgrade our rating to BUY (HOLD)
Cash offer for Swedish technology company Semcon
Etteplan announced a recommended cash offer of SEK 149 per Semcon’s share, for a total value of approx. SEK 2,699m. The Board of Directors of Semcon has unanimously recommended that the shareholders of Semcon accept the offer. The offer is conditional among other things upon the offer being accepted to more than 90 percent and approval from the Swedish Competition Authority. Semcon is an international technology company with more than 2,000 employees and 2021 revenue of SEK 1,711.3m and operating profit of SEK 175.1m. The combined entity would on consensus estimates have a combined 2022e revenue of over EUR 500m and have a strong market position in particular in the Nordics. Synergy effects are estimated to amount to EUR 5m on an annual basis.
Financing secured, planning EUR 110-125m rights issue
The completion of the offer is not subject to any financing condition and Etteplan is furthermore planning a rights issue of EUR 110-125m. Both the offer and rights issue appear to have good support from existing shareholders of Both Semcon and Etteplan. We see that the transaction would benefit both Etteplan as a company as well as shareholders.
BUY (HOLD) with a target price of EUR 18 (16)
Considering consensus estimates for Etteplan and Semcon along with valuation considerations and the impact of the transaction on net debt and nr. of shares, we see a potential of some 10-20% in the coming years depending on realization of synergy effects. Despite uncertainty, the offer appears favourable for shareholders and with the size and geographic presences of both companies and geographic presences the likelihood of regulatory obstacles appears limited. We adjust our TP to EUR 18 (16), rating upgraded to BUY (HOLD). Our estimates remain intact for now.
Etteplan announced a recommended cash offer of SEK 149 per Semcon’s share, for a total value of approx. SEK 2,699m. Semcon would in our view be a suitable fit for Etteplan, strengthening the service offering and international presence along with offered synergy effects.
Etteplan continued to post good growth figures in Q2, but profitability came in slightly soft. Etteplan expects the demand situation to remain fairly good throughout 2022, but we see some added uncertainty going forward.
Continued good growth, profitability on the softer side
Etteplan reported fairly good Q2 results despite some softness in profitability. Revenue grew 18.9% y/y (10.3% organic excl. FX) to EUR 89.3m (88.8m/89.9m Evli/cons.) and EBIT amounted to EUR 6.8m (7.4m/8.0m Evli/cons.). The performance in Engineering Solutions was very good and slightly above our estimates while Technical Documentation Solutions and Software and Embedded Solutions performed below expectations. Group profitability overall was affected by increased travel and personnel event/training related expenses along with increased sick leaves and holidays. Organizational restructuring measures were implemented in Software and Embedded Solutions due to a weakened operational efficiency. Guidance kept intact, expecting revenue of EUR 340-370m and EBIT of EUR 28-32m in 2022.
Earnings uncertainty increased heading into H2
Based on management comments the market environment is expected to remain at fairly decent levels despite the uncertainty and some fluctuations. Our estimates remain largely unchanged, having slightly lowered our profitability expectations following continued weaker profitability in Technical Documentation Solutions and Software and Embedded Solutions. A normalization of the high level of travel and personnel expenses in Q2 should slightly benefit profitability but the faced challenges relating to operational efficiency appear unlikely to be fixed in the very short-term.
HOLD-rating with a target price of EUR 16.0 (17.0)
Etteplan’s Q2 report overall was slightly on the softer and we perceive a slight increase in uncertainty related to the market environment, due to which we adjust our target price to EUR 16.0 (17.0), HOLD-rating intact. Etteplan’s valuation currently remains justifiably above the peer median but potential upside remains limited in the current environment.
Etteplan's net sales in Q2 amounted to EUR 89.3m (EUR 88.8m/89.9m Evli/cons.), with continued solid growth of 19% y/y (10.3% organic). EBIT amounted to EUR 6.8m (EUR 7.4m/8.0m Evli/cons.), with lower relative profitability y/y due to among other things increases in personnel events as well as sick leaves and holidays.
Etteplan saw strong growth and good profitability in Q1. Presently, no clear signs of a notable deterioration in the demand situation appear to be seen, but the uncertainty has understandably increased.
Double-digit organic growth in Q1
Etteplan reported overall solid Q1 results and clearly better than we had anticipated. Although increased sick-leaves and lockdowns affected operations, revenue still grew 23% y/y and near 15% organically to EUR 89.6m (EUR 81.2m/87.7m Evli/cons.). Profitability was also at good levels, with EBIT of EUR 7.6m (EUR 6.5m/6.9m Evli/cons.), at a margin of 8.5%. On service area levels, compared with our estimates, revenue and profitability was better across the board. Profitability in Engineering Solutions in particular was solid following as a result of excellent operational efficiency levels.
Market outlook still appears to be fairly favourable
Comments regarding the demand situation and market uncertainties were all in all somewhat upbeat, and potential near-term demand declines in some sectors seem to be offset by increased demand in others. The direct impacts of the war in Ukraine have as expected so far been limited. COVID-19 still poses issues due to sick-leaves and lockdowns in China. Etteplan kept its guidance intact, expecting revenue of EUR 340-370m and EBIT of EUR 28-32m. Following the solid Q1 figures and some slight tweaks to the following quarters our estimates are now quite in line with the mid-range of the guidance. We take a rather neutral approach given the current uncertainties, still seeing good organic growth but at a slightly lower pace compared with Q1.
HOLD with a target price of EUR 17.0 (16.5)
Etteplan currently quite justifiably trades above peers given the good growth and profitability. More optimal market conditions could well justify >20x P/E levels but with the current uncertainties and ~20% y/y deterioration in peer median NTM P/E current levels appear quite fair. We adjust our TP to EUR 17.0 (16.5) due to estimates revisions, HOLD-rating intact.
Our concerns for a softer Q1 were clearly unfounded, as Etteplan's net sales grew 23% to EUR 89.6m, above our estimates and slightly above consensus (EUR 81.2m/87.7m Evli/cons.). EBIT amounted to EUR 7.6m, above our and consensus estimates (EUR 6.5m/6.9m Evli/cons.).
Etteplan reports Q1 results on May 5th. We remain on the cautious side due to the seen increase in sick leaves. Some uncertainty is brought by Ukraine crisis but overall, we see no major changes to our views.
Cautious approach to Q1 due to increases in sick leaves
Etteplan reports Q1 results on May 5th. Our Q1 estimates remain more on the conservative side as a precaution given the increases in sick leaves seen in conjunction with the Q4 report, but with the good growth figures posted in Q4 there is certainly potential for faster growth. In terms of profitability, we expect a similar trend as during 2021, with the full-year EBIT-margins set to remain near the 9% mark. Our estimates for Q1 are unchanged ahead of the earnings report, with our net sales and EBIT estimates at EUR 81.2m (Q1/21: EUR 73.0m) and EUR 6.5m (Q1/21: EUR 6.6m) respectively.
Some potential indirect demand uncertainty
The guidance given for 2022 in the Q4 report was in our view quite solid, with revenue estimated to be between EUR 340-370m and EBIT to be between EUR 28-32m. The mid-range of the guidance according to our estimates would imply an organic growth of around 10% excluding potential new acquisitions. The situation in Ukraine has caused some additional demand uncertainty, although potential direct impacts should not be material, as Etteplan to our understanding does not have any significant business in the countries directly affected. Although we do not see any notable pressure on margins, we note that Etteplan proved its resilience and adaptability to changes in the demand environment during the pandemic. Our 2022 estimates remain unchanged, with our revenue and EBIT estimates at EUR 344.5m and 29.3m respectively.
HOLD with a target price of EUR 16.5 (17.5)
Although our estimates remain intact, we adjust our target price slightly to EUR 16.5 (17.5) in light of the added uncertainty factors. Our target price values Etteplan at approx. 19x 2022 P/E. We retain our HOLD-rating.
Etteplan’s Q4 figures were quite in line with expectations. The 2022 guidance implies solid growth, which we currently have some challenges in envisaging.
Q4 quite in line with expectations
Etteplan reported Q4 results quite in line with expectations. Revenue grew some 21% to EUR 85.3m (EUR 82.9m/82.9m Evli/cons.), with organic growth of some 15%. EBIT amounted to EUR 7.8m (EUR 7.9m/8.1m Evli/cons.). Growth was particularly good in Software and Embedded solutions, although profitability suffered slightly from growth investments and the increased use of subcontracting due to the challenges with availability of professionals within certain areas.
Guidance implies solid growth
Etteplan gave a rather good guidance, in particular in terms of growth, with revenue expected to amount to EUR 340-370m and EBIT to EUR 28-32m, with pre-Q4 expectations of EUR 338.3m/326.9m (Evli/cons.) and 29.6m/29.6m (Evli/cons.) respectively. Taking into account the inorganic growth from the recent acquisitions of Cognitas and Syncore Technologies along with acquisitions made during 2021 the mid-range of the guidance would imply organic growth somewhere near 10%, which although certainly not unachievable, currently seems somewhat challenging due to the pandemic and some demand uncertainties. Growth could of course still be boosted by further acquisitions in line with the company’s strategy. The good organic growth in 2021 (8.9% y/y) was also skewed by the weak comparison period. We have made only slight changes to our 2022 estimates, expecting revenue of EUR 344.5m and EBIT of EUR 29.3m. Some weakness is seen during the start of 2022 due to the pandemic but we expect relative profitability and growth to pick up going forward.
HOLD with a target price of EUR 17.5 (17.0)
With only smaller changes to our estimates, we adjust our target price to EUR 17.5 (17.0), valuing Etteplan at approx. 20x 2022e P/E. Current valuation appears quite fair looking at peers and historical multiples. We retain our HOLD-rating.
Etteplan's net sales in Q4 amounted to EUR 85.3m (EUR 82.9m/82.9m Evli/cons.) and operating profit to EUR 7.8m (EUR 7.9m/8.1m Evli/cons.). Dividend proposal: EUR 0.40 per share (EUR 0.40/0.40 Evli/Cons.). 2022 guidance: revenue EUR 340-370m and operating profit EUR 28-32m.
Etteplan reports Q4 results on February 10th, with expectations of rather good growth and margins. Growth is set to continue in the double-digits in 2022 with the recent acquisitions.
Rather good Q4 figures expected
Etteplan reports Q4 results on February 10th. Etteplan’s Q3 results were on the softer side due to the vacation season and a slower start to projects as well as the global component shortage. Etteplan’s organic growth investments also started to pick up, with the headcount up some 4% q/q (partly from acquisitions), which had a slight impact on profitability. We expect revenue growth of 17.9% to EUR 82.9m (cons. 82.9m), with pickup in demand from the weaker comparison period and made acquisitions. We expect a quite good level of profitability, although below the comparison period, with growth investments having picked up. We expect an EBIT of EUR 7.9m (cons. 8.1m). The company estimates 2021 revenue to be EUR 295-310m (Evli EUR 297.7m) and EBIT of EUR 25-28m (Evli 25.9m). Our Q4 estimates are intact ahead of the results.
Acquisitions boosting 2022 growth expectations
Etteplan recently acquired technical information lifecycle management company Cognitas GmbH and technology services company Syncore Technologies Ab, focusing on embedded systems. The combined historic revenue of the acquired companies is at around EUR 20m. We have adjusted our estimates for the acquisitions, expecting 2022 revenue of EUR 338.3m, for a y/y growth of 13.6%. We expect EBIT of EUR 29.6m at an 8.8% margin, on par with expected previous year levels. Margin uncertainty relating to growth investments and market environment is present but should the growth investments translate into organic growth as planned, then healthy margins should reasonably be expected.
HOLD with a target price of EUR 17.0
We retain our target price of EUR 17.0 and HOLD-rating. Current valuation on our estimates appears quite elevated compared with peers, with 2022E P/E of ~20x.
Etteplan’s Q3 fell slightly short of our estimates. Investments into growth should bear fruition in 2022 but near-term cost and demand uncertainty is seen.
Etteplan's net sales in Q3 amounted to EUR 66.9m, slightly below our estimates and below consensus (EUR 69.3m/71.0m Evli/cons.). EBIT amounted to EUR 4.6m, below our consensus estimates (EUR 5.2m/5.6m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 295-310m (prev. EUR 295-315m) and operating profit (EBIT) to amount to EUR 25-28m.
Etteplan reports its Q3 results on October 28th. We expect to see solid growth figures on the weak comparison period and continued good profitability, with some reservation for potential cost inflation. We retain our HOLD-rating and target price of EUR 17.5.
Growth on weak comparison figures in H1
Etteplan’s H1 started off on quite positively, with revenue growing 10.3%, albeit on weaker comparison period figures due to the impact of the pandemic. Growth was supported by recovery in demand but largely by inorganic growth. Good operational efficiency kept the group EBITA-margin above the target 10% level at 10.5%. Etteplan raised its revenue guidance range to EUR 295-315m (prev. EUR 285-305m), with the EUR 25-28m EBIT guidance range intact. Etteplan has during Q2-Q3 made several mainly smaller acquisitions, F.I.T. (DE) and Skyrise.tech (PL) in Q2 and BST Buck Systemtechnik (DE) and Adina Solutions (FI), strengthening especially the company’s Technical Documentation Solutions and Software and Embedded Solutions service areas and the company’s presence in Europe.
Potential minor cost inflation concerns
Etteplan is set to grow well on the weak comparison period figures, with our Q3 growth estimate at 25.4%. We estimate a group EBIT of EUR 5.2m, at a 7.6% margin. We remain slightly more on the conservative side in particular in regard to profitability in comparison to previous quarters, as some potential triggers for cost inflation were seen in Q2 from new recruitments and own growth initiatives picking up. Q3 is also seasonally slower which will have an impact on figures compared to previous quarters. For the full year we estimate revenue of EUR 300m and an EBIT of EUR 26.4m, quite near the mid-point of the guidance.
HOLD-rating with a target price of EUR 17.5
We have made no significant changes to our estimates ahead of the Q3 report and retain our HOLD-rating and target price of EUR 17.5. Our TP values Etteplan at ~20x 2022e P/E.
Etteplan’s Q2 results were quite in line with expectations. Growth is set to return to double digits this year and Etteplan is taking steps to keep the momentum going. Etteplan also raised its 2021 revenue guidance on the positive H1 development to EUR 295-315m (285-305m).
Q2 quite in line with expectations
Etteplan reported its Q2 results, which overall were quite in line with expectations. Revenue grew 19% y/y to EU 75.0m (EUR 73.7m/73.6m Evli/cons.). EBIT amounted to EUR 6.7m (EUR 6.5m/7.3m Evli/cons.). Good operational efficiency kept the group EBITA-margin above the target 10% level at 10.4% (Evli 10.2%). On our estimates the stronger performers of the quarter were the Technical Documentation Solutions and Software and Embedded Solutions service areas, which both surpassed expectations on growth and profitability. Customer order intake has continued favourably and although the pandemic still causes uncertainty, Etteplan raised its revenue guidance range to EUR 295-315m (prev. EUR 285-305m), with the EUR 25-28m EBIT guidance range intact.
Preparing for continued growth
We have made only minor revisions to our estimates. For 2021 we have slightly raised our expectations for the Technical Documentation Solutions and Software and Embedded Solutions service areas in light of the good traction in Q2. We now expect revenue of EUR 299.8m (prev. 294.9m) and EBIT of EUR 26.3m. The number of employees has increased by over 200 since the end of 2020 to 3,491 and recruitment is actively on-going, which together with other growth ambitions will cause some cost inflation on H2 but also support organic growth going forward given a continued healthier demand situation. Double-digit growth also in 2022 is most certainly within grasp but will require continued M&A activity.
HOLD-rating with a target price of EUR 17.5
We have made no significant changes to our estimates and retain our HOLD-rating and target price of EUR 17.5. Our TP values Etteplan at ~20x 2022e P/E.
Etteplan's net sales in Q2 amounted to EUR 75.0m, in line with our and consensus estimates (EUR 73.7m/73.6m Evli/cons.). EBIT was also quite in line with our estimates and slightly below consensus, at EUR 6.7m (EUR 6.5m/7.3m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 295-315m (prev. EUR 285-305m) and operating profit (EBIT) to amount to EUR 25-28m.
Etteplan reports Q2 results on August 11th and we expect notable improvement from the weak comparison period. Etteplan has continued its growth strategy, acquiring three smaller companies since Q1. We adjust our TP to EUR 17.5 (16.0) on elevated peer multiples, HOLD-rating intact.
Expect clear improvement from weak comparison period
Etteplan reports its Q2 results on August 11th. Q1 results were still somewhat mixed, with group revenue turning back to slight growth but organic growth still negative at 4%. Relative profitability was well above comparison period levels, with cost cutting measures made due to the pandemic having a notable impact. As Q2/20 was the first quarter to bear the brunt of the impact of the pandemic we expect clearly higher growth figures in Q2/21 from the weak comparison period. We expect revenue to grow some 17% to EUR 73.7m, of which we expect some 6% inorganic growth. We expect EBITA to remain above the 10% target level at 10.2%.
Several smaller acquisitions to continue growth strategy
Etteplan has made two acquisitions during Q2, software development company Skyrise.tech and technical documentation specialist F.I.T. Fahrzeug Ingenieurtechnik GmbH, and Adina Solutions after the review period, specialized in planning and implementation of technical documentation of software. The revenue impact on group level in 2021 should be rather marginal but we have made minor tweaks to our estimates to account for the acquisitions. We now expect 2021 revenue of EUR 294.9m and EBIT of EUR 26.3m, quite in the middle of company guidance (revenue EUR 285-305m and EBIT EUR 25-28m). We expect relative profitability to improve y/y in H1 but to revert back to comparison period levels in H2 as previously implemented cost savings measured are eased.
HOLD-rating with a target price of EUR 17.5 (16.0)
Etteplan’s valuation has risen clearly since our previous update, now trading well above historical levels. Peer multiples have also increased quite a bit and we raise our TP to EUR 17.5 (16.0), valuing Etteplan at ~20x 2022e P/E and retain our HOLD-rating.
Etteplan reported better than expected Q1 figures and raised its sales and EBIT guidance. The market situation has continued to develop favourably and Etteplan is seen to move towards a new normal during the latter half of the year. We adjust our TP to EUR 16.0 (13.9) and upgrade our rating to HOLD (SELL).
Better than expected start to the year
Etteplan reported better than expected Q1 figures. Revenue grew slightly y/y to EUR 73.0m (EUR 71.1m/71.3m Evli/cons.) but decreased 4% organically. EBIT amounted to EUR 6.6m, above our and consensus estimates (EUR 5.4m/5.5m Evli/cons.), with the EBITA-% at 10.5% (co’s fin. target 10%). Demand across Etteplan’s markets continued to develop favourably, with China unaffected by the pandemic and hours sold up 121% y/y from the weak comparison period. With the strong start to the year and confidence in continued improvement in the market situation throughout the year Etteplan also raised its guidance for 2021, expecting revenue of EUR 285-305m (280m-300m) and EBIT of EUR 25-28m (23-26m).
Moving towards a new normal
We have slightly raised our 2021 sales estimate to EUR 292.6m and our EBIT estimate by approx. 7% to EUR 26.1m, mainly due to the stronger than expected Q1. Margins in the past two quarters have been exceptionally good due to the strict cost control and with operations shifting back towards a new normal cost will be on the rise and we as such expect weaker margins y/y in H2. Organic growth is still somewhat of a concern but with market conditions improving and the company actively recruiting as well as having increased usage of subcontracting, the already begun more positive trend should pick up.
HOLD (SELL) with a target price of EUR 16.0 (13.9)
Looking at the solid start of the year we have been too bearish on Etteplan and the development of the overall market situation. This being said, we still see limits in valuation upside with Etteplan already trading rather clearly above peers. We adjust our target price to EUR 16.0 (13.9) and upgrade to HOLD (SELL).
Etteplan's net sales in Q1 amounted to EUR 73.0m, in line with our estimates and consensus (EUR 71.1m/71.3m Evli/cons.). EBIT amounted to EUR 6.6m, above our estimates and above consensus estimates (EUR 5.4m/5.5m Evli/cons.). Guidance specified: Etteplan expects revenue to amount to EUR 285-305m (280-300m) and operating profit (EBIT) to amount to EUR 25-28m (23-26m).
Etteplan reports Q1 results on May 5th. We expect a relatively decent start to the year and our focus will be less on current figures and more on demand development and future growth drivers. We retain our target price of EUR 13.6 and SELL-rating.
Expect a decent start to the year
Etteplan reports Q1 results on May 5th. 2020 was a challenging year for Etteplan due to the Coronavirus pandemic, with the organic decrease in revenue at 8.3%. Due to rapid and efficient cost savings measures Etteplan was still able to maintain solid profitability, with the EBITA-margin at 10.1% (2019: 9.9%). To our understanding the customer demand during the beginning of the year has continued to move in the right direction, with customer companies having adapted to operating under the current environment. We have made no changes to our estimates ahead of the Q1 results, expecting revenue of EUR 71.1m and EBITA of EUR 6.4m.
Demand situation and growth drivers’ key themes
Going into 2021 key themes will be the development of customer demand and pick up in Etteplan’s internal growth initiatives, with quite some work left to reach the target of EUR over 500m in revenue in 2024. As earlier mentioned, customer demand has been developing positively and has for instance been at a good level in China, while demand in other countries could still see notable improvement. We expect growth of 11.2% in 2021, aided largely by the Tegema and TekPartner acquisitions. Our organic growth assumptions remain rather modest and an improvement in the demand situation could warrant higher estimates. We expect the EBITA-margin to remain near previous year levels at 9.9% (2020: 10.1%).
SELL with a target price of EUR 13.6
We have made no changes to our estimates and retain our target price of EUR 13.6 and SELL-rating. Etteplan currently trades above peers and with the prevailing uncertainty due to the pandemic and growth pick-up we find the >21x 2021 P/E multiples hard to justify.
Etteplan reported better than expected profitability figures in Q4. The guidance for 2021 is in line with our expectations and we make no larger changes to our estimates. Uncertainty in demand pick-up is still present and we expect a sluggish start to 2021. We retain our SELL-rating and target price of EUR 13.6.
Better than expected profitability in Q4
Etteplan reported solid profitability figures in Q4, with EBIT at EUR 7.1m (EUR 6.5m/6.6m Evli/cons.) and EBIT (excl. NRI’s) of EUR 7.4m. Revenue was slightly below expectations, at EUR 70.3m (EUR 71.8m Evli/cons.). Etteplan proposes a dividend distribution of EUR 0.34 per share (EUR 0.33 Evli/cons.). Positive news on the rollout of Coronavirus vaccines aided demand in Q4. In 2021 Etteplan expects revenue to amount to EUR 280-300m and EBIT to amount to EUR 23-26m.
Demand pick-up uncertainty but acquisitions boost growth
We have made only minor revisions post-Q4, with our estimates still near the mid-point of the guidance range (revenue EUR 288.9m and EBIT EUR 24.5m). Growth is aided by the Tegeman and TekPartner acquisitions and we expect double-digit growth. 2021 should start of somewhat sluggish but we expect demand to pick up going into mid-2021. Cost expansion after the strict cost discipline in 2020 and recruitments in 2021 should limit margin upside and we expect to see margins similar to 2020. The outlook for 2021 is looking brighter but we still see uncertainty in organic growth capabilities. Lockdowns and restrictions are continuing to impact the overall economy and the first half of the year in that regard appears challenging, but we are carefully optimistic going forward.
SELL with a target price of EUR 13.6
With no larger changes to our estimates we retain our target price of EUR 13.6 and SELL-rating. Our target price values Etteplan at 18x 2021 P/E, which we consider justified given the still present uncertainty.
Etteplan's net sales in Q4 amounted to EUR 70.3m, slightly below our and consensus estimates (EUR 71.8m/71.8m Evli/cons.). EBIT amounted to EUR 7.1m, above our and consensus estimates (EUR 6.5m/6.6m Evli/cons.). Etteplan proposes a dividend of EUR 0.34 per share (EUR 0.33/0.33 Evli/Cons.).
We expect Etteplan to report solid Q4 figures and propose a dividend distribution of EUR 0.33 per share. With the acquisition of TekPartner we now expect double-digit growth in 2021. With valuation now at levels that we find hard to justify, we lower our rating to SELL (HOLD) with a target price of EUR 13.6 (12.4)
Solid fourth quarter expected
Etteplan reports Q4 results on February 11th. We expect Etteplan to report solid figures, with the guidance update given in December implying better figures than in the comparison period. Our Q4 net sales and EBIT estimates are at EUR 71.8m and 6.5m respectively. The fourth quarter development is seen to have been aided by a pick-up in customer investment activity following positive news on Coronavirus vaccine rollout. We expect Etteplan to propose a dividend distribution of EUR 0.33 per share.
Expecting return to double-digit growth
We have made adjustments to our estimates after the acquisition of TekPartner and expansion to Denmark. TekPartner’s revenue in 2019 amounted to approx. EUR 8m. We now expect growth of 11.2% in 2021. Growth is supported by the Tegeman and TekPartner acquisitions. The 2021 guidance will be of key interest. We would expect to see a guidance reflecting clear growth in revenue and possibly also EBIT, although with the uncertainties a more careful approach may be taken this early on in 2021. We have assumed relatively flat margin development in 2021, expecting the strict cost savings measures in 2020 to be phased out during the year and growth and internal project investments to pick up.
SELL (HOLD) with a target price of EUR 13.6 (12.4)
Etteplan’s share price has picked up clearly, now trading quite clearly above peers. Although we could find justification for valuation above that of peers, we have a hard time justifying current absolute valuation levels given the still present uncertainty. We adjust our target price to EUR 13.6 (12.4) on our revised estimates but downgrade our rating to SELL (HOLD).
Etteplan raised its revenue and EBIT guidance for 2020, as investment demand has been picking up on the positive news on Coronavirus vaccines, with the fourth quarter set to show solid figures. We have raised our 2020-2022 EBIT estimates by some 6-9%. We retain our HOLD-rating with a target price of EUR 12.4 (9.3)
2020 revenue and EBIT guidance raised
Etteplan issued a positive profit warning, raising its revenue and EBIT guidance. Revenue in 2020 is now expected to be at same levels as in the previous year (prev. decrease slightly or same levels as previous year) and operating profit to decrease slightly or be at previous year levels (prev. decrease clearly). According to Etteplan the positive news on Coronavirus vaccines has had a favourable impact on investments and as such aided revenue during the last quarter of the year. The impact has been seen across the board but in particular within software and digitalization related solutions.
Moving in a better direction
The revised guidance implies solid results in the fourth quarter and is a clear confidence boost after the demand weakness in previous quarters. We have raised our 2020-2022 EBIT estimates by some 6-9%. We still remain somewhat cautious to revenue growth, as demand pick-up visibility is still rather limited, expecting a growth of 6.9% in 2021. We could certainly see potential for growth returning to double-digit figures if demand activity continues to improve. The Tegeman acquisition will also provide an inorganic boost to growth in 2021 and continued M&A activity is likely, although hard to predict.
HOLD with a target price of EUR 12.4 (9.3)
On our estimates Etteplan trades quite in line with historic valuation and on peer median multiples. The positive news has certainly raised our confidence levels but with the still present uncertainty higher valuation for now appears unwarranted. We adjust our TP to EUR 12.4 (9.3), valuing Etteplan at 18x 2021e P/E, and retain our HOLD-rating.
Etteplan posted better than expected profitability figures in the challenging circumstances. The uncertainty due to the second wave of the pandemic is causing an increasing lack of visibility. The outlook at least for the first half of 2021 does not appear favourable but we continue to expect growth aided by the recent acquisition.
Earnings beat in challenging quarter
Etteplan posted good profitability figures in the seasonally slower quarter and challenging environment. EBIT amounted to EUR 4.3m, beating expectations (EUR 2.9m/3.1m Evli/cons.). Revenue declined 10.3% y/y (organic decrease 13.3%) to EUR 55.2m (EUR 55.6m/55.3m Evli/cons.). Etteplan also updated its guidance, expecting revenue for the year 2020 to decrease slightly or be at the same level as in the previous year and operating profit (EBIT) to decrease clearly compared to 2019. Demand uncertainty continued and the second wave brought further uncertainty especially after the summer holidays.
Uncertainty on the rise with the second wave
The increased uncertainty brought by the second wave reduces the already low visibility going into 2021. Etteplan has so far fared well given the circumstances, having adopted substantial cost savings measures. Compared with Q2, lockdowns and restrictions are not affecting customer industries to the same extent, but customers are still cautious in making investment decisions. We assume the demand uncertainty to continue to impact on activity at least during the first half of the year. We still expect recovery compared with 2020 and supported by the Tegeman acquisition expect a 6.5% growth in 2021. We expect margins to remain at 2020e levels.
HOLD with a target price of EUR 9.3
Peers’ multiples have been under pressure with the second wave uncertainty and governments seeking to increase restrictions and the fwd. 12m median EV/EBITDA for the selected peer group has dropped by some 9% in the past few days to 8.3x, while Etteplan trades at 7.6x. With the uncertainty possibly still on the rise we retain our HOLD-rating and target price of EUR 9.3.
Etteplan's net sales in Q3 amounted to EUR 55.2m, in line with our estimates and consensus (EUR 55.6m/55.3m Evli/cons.). EBIT amounted to EUR 4.3m, above our and consensus estimates (EUR 2.9m/3.1m Evli/cons.). Guidance updated: revenue in 2020 is expected to decrease slightly or be at the same level as in 2019 and EBIT to decrease clearly compared to 2019.
Etteplan reports Q3 results on October 29th. We expect weakish figures in the seasonally slower quarter, as the impact on demand of the COVID-19 induced uncertainty should also show clearly. We estimate a sales decline of 9.6% in the quarter and an EBIT-margin of 5.3%. We adjust our target price to EUR 9.3 (8.7) and retain our HOLD-rating.
Seasonal slowness and COVID-19 impact
Etteplan’s Q2 results were a clear positive in the challenging environment and timely measures taken helped in keeping up profitability. The organic decline in revenue was 11.3%. During Q3 the market environment overall saw improvement compared with the restrictions during Q2 but with the third quarter being seasonally slower and a trickle-down effect of the demand weakness in Q2 we expect weakish figures. With the capacity reduction due to temporary layoffs to our understanding somewhat similar to that of Q2 we expect a similar organic revenue decline, expecting revenue of EUR 55.6m (Q3/19: EUR 61.5m). Despite good cost control, we still expect the lower revenue to have an impact on profitability and estimate an adj. EBIT of EUR 2.9m (Q3/19: EUR 4.9m), at a margin of 5.3%.
2020E: sales decline 1.7% and EBIT of EUR 18.4m
Etteplan reissued a guidance in Q2, expecting 2020 revenue to decrease slightly or be at 2019 levels and EBIT to decrease compared with 2019. We currently estimate a sales decline of 1.7% in 2020 and EBIT of EUR 18.4m (2019: EUR 22.8m). The situation with the coronavirus pandemic has turned to the worse again with the second wave and we will be keeping our eyes on comments on the potential effect on demand development.
HOLD with a target price of EUR 9.3 (8.7)
We have made only minor tweaks to our estimates ahead of the Q3 results. With the slightly improved sentiment after Q2 and peer multiple appreciation we adjust our target price to EUR 9.3 (EUR 8.7), valuing Etteplan at 7.5x 2020 EV/EBITDA, and retain our HOLD-rating.
Ettplan’s timely actions to reduce costs saw EBIT remaining strong, at EUR 5.4m (Evli/cons. EUR 3.2m/3.8m) despite the organic revenue decrease of 11.3%. Challenges will continue in coming quarters but the hit from the pandemic so far appears smaller than we had feared.
Timely cost reduction actions kept profitability strong
Etteplan reported Q2 results that were above expectations given the challenging circumstances. Revenue was in line with expectations at EUR 62.9m (EUR 63.3m/63.3m Evli/cons.), decreasing 2.2% y/y and organically 11.3% y/y. EBIT was clearly better than expected, at EUR 5.4m (Evli/cons. EUR 3.2m/3.8m). Profitability was aided by timely actions made to reduce operating costs. With operating costs declining faster than cash flow from sales, Etteplan posted an exceptionally strong operating cash flow of EUR 18.0m (Q2/19: 8.8m). The uncertainty in customer demand remains but we interpret comments by the company pointing to expectations of some recovery in the second half of the year. Etteplan reinstituted a guidance for 2020, expecting sales to light decrease slightly or remain at 2019 levels and EBIT to decrease compared to 2019.
The hit to 2020 figures not as bad as feared based on H1
With the higher than anticipated reduction in operating expenses we adjust our 2020 EBIT estimate to EUR 18.1m (prev. 14.3m), while keeping our revenue estimates largely intact. We expect 2020 revenue of EUR 258.3m for an estimated organic decline of some 7%. Our estimates assume similar capacity decreases due to temporary layoffs in Q3 as Q2 and roughly half the decrease in Q4. Visibility into the coming years is weak but we expect to see Etteplan returning to growth in 2021, as although a second wave of the pandemic may cause challenges, lessons learned during the first wave should result in a lesser strain on both Etteplan and customers.
HOLD with a target price of EUR 8.7 (8.3)
Based on our revised estimates we adjust our target price to EUR 8.7 (8.3), for a 2020e P/E of ~16x, which we currently consider fair given the elevated uncertainty. We retain our HOLD-rating.
Etteplan's net sales in Q2 amounted to EUR 62.9m, in line with our estimates and consensus (EUR 63.3m/63.3m Evli/cons.). EBIT amounted to EUR 5.4m, above our consensus estimates (EUR 3.2m/3.8m Evli/cons.). Etteplan expects 2020 revenue to decrease slightly or be at the same level as in 2019 and EBIT to decrease compared to 2019.
Etteplan reports Q2 results on August 11th. The coronavirus pandemic will have had a detrimental impact on results, but we see a rapid adaption to have limited some of the earnings impact. We expect an organic revenue decline of ~9% and EBITA of EUR 4.1m. We retain our HOLD-rating with a TP of EUR 8.3 (8.0).
Weaker Q2 but rapid adaption should limit some downside
Etteplan will report Q2 results on August 11th. Earnings uncertainty is clearly elevated due to the coronavirus pandemic, with Q1 challenges having been mainly limited to operations in China. Etteplan adapted rapidly to the situation through temporary layoffs and reducing its cost base which together with the order backlog should according to our estimates still yield a fairly decent profitability given the circumstances. We expect revenue of EUR 63.3m, representing a perceived organic growth decline of approx. 9%, and group EBITA to decline to EUR 4.1m (Q2/19: EUR 6.5m). With the loan agreements made earlier we do not see any significant risk to Etteplan’s financial position.
Uncertainty remains elevated in 2020
The development in 2020 remains shrouded by uncertainty due to the pandemic but we currently expect the biggest dent to be seen in Q3 and Q4 to also remain weaker. The Engineering Solutions service area will have some challenging times ahead while Software and Embedded Solutions should be rather resilient due to digitalization demand. Reported new order values in Q2 for some key customers indicate a double-digit decline y/y, with expectations of demand picking up towards the end of the year. Etteplan’s customer base is relatively diverse and thankfully for instance automotive and aviation, which have been hit hard by the pandemic, account for only a small share of revenue.
HOLD with a target price of EUR 8.3 (8.0)
We have made minor upwards adjustments to our 2020 estimates following an in our view somewhat improved sentiment post-Q1 and revisions based on updates on temporary layoffs. We adjust our target price to EUR 8.3 (8.0) and retain our HOLD-rating.
Etteplan’s Q1 results were better than feared and market turbulence had a rather minor impact, with a slight decline in organic growth. We expect an average organic growth of around -7% in 2020 and EBITA to decline to EUR 16.9m (2019: 25.9m). We retain our HOLD-rating with a target price of EUR 8.0 (6.9).
Q1 results better than expected
Etteplan’s Q1 results beat our and consensus estimates. Revenue amounted to EUR 71.3m (EUR 67.0m/70.0m Evli/Cons.) and EBIT to EUR 5.7m (EUR 4.4m/5.0m Evli/cons.). The assumed effect of the COVID-19 pandemic and labor market turbulence in Finland on Q1 was fortunately smaller than expected. The organic growth did however turn negative and was -1.9% on comparable FX. The number of hours sold in China decreased 25% y/y but business was nearly back to normal by the end of March.
We expect 2020 organic growth of around -7%
Uncertainty in the coming quarters is elevated by the COVID-19 pandemic and visibility is low, due to which Etteplan is also not giving a guidance for 2020. We use the number of temporary layoffs as a benchmark for our 2020 estimates, for which we assume an upper bound for the Q2 average FTE capacity decrease of around 8%. Pricing pressure is further likely to increase along with a risk for credit losses, for which Etteplan made minor reservations in Q1. We currently assume that the situation will improve in the latter quarters but still expect an average organic growth of around -7% in 2020, with our 2020 revenue estimate at EUR 259.8m (2019: 262.7m). We expect 2020 EBITA to decline to EUR 16.9m (2019 25.9m).
HOLD with a target price of EUR 8.0 (6.9)
Etteplan is currently trading at 8.2x 2020 EV/EBITDA on our estimates, with peers trading at ~8.8x. With the COVID-impact now more accurately reflected in peer multiples we assign a higher weight on peer multiples, keeping the pre-COVID average NTM EV/EBITDA of 9.0x as a benchmark, and along with some added confidence from the Q1 report raise our target price to EUR 8.0 (6.9) and retain our HOLD-rating.
Etteplan withdrew its guidance for the time being due to uncertainty caused by the coronavirus outbreak. The increased uncertainty in the global economy has adversely affected customer demand and will have a negative impact on financial development. We have lowered our 2020 estimates, expecting revenue to remain at 2019 levels and EBITA to decline clearly. We lower our target price to EUR 6.9 (10.2) and retain our HOLD-rating.
Guidance withdrawn due to coronavirus uncertainty
Etteplan withdrew its guidance for the time being due to uncertainty caused by the coronavirus outbreak, having previously estimate revenue in 2020 to increase clearly and EBIT to be at the same level or improve compared with 2019. The coronavirus outbreak has adversely affected customer demand essentially across all customer segments. Europe is expected to show weak figures in Q2, while the in Q1 weak Chinese economy has now been picking up and demand development there is showing favourable signs.
2020 EBITA estimate down some 35%
We expect the outbreak to have a clear negative effect on financial development in 2020E. We expect the brunt of the impact on Q2/Q3 while Q1 is expected to have been somewhat weaker due to the situation in China. We note the challenges in near-term estimation due to the lacking visibility and unforeseeable nature of the consequences of the outbreak. We currently expect 2020 revenue to remain at 2019 levels, despite the current situation due to inorganic growth, and profitability to decline clearly, with our EBITA estimate at EUR 18.1m (27.5m).
HOLD with a target price of EUR 6.9 (10.2)
Etteplan has on a three-year average NTM EV/EBITDA traded at around 9.0x. Assuming a swift return to a normalized demand situation current valuation is in no way challenging. The significant near-term uncertainty, however, warrants a discount and we value Etteplan at 2020E EV/EBITDA of 7.0x, and with our 2020E EBITDA estimate down some 25% we lower our target price to EUR 6.9 (10.2) and retain our HOLD-rating.
Etteplan’s Q4 results were below expectations, driven by the impact of the industrial strike in Finland. The guidance for 2020 EBIT was softer than expected, with some caution being taken due to the unpredictability in the impact of the coronavirus. Demand outlook comments were nonetheless slightly positive based on early 2020 development. We have slightly lowered our 2020 estimates to account for a likely weaker Q1. We retain our HOLD-rating with an ex-div TP of EUR 10.2.
Clear negative impact of industrial strike
Etteplan’s Q4 results were below expectations. Revenue amounted to EUR 71.8m (EUR 72.1m/72.7m Evli/cons.), with 14.2% growth y/y (1.4% organic excl. FX), driven by the mid-2019 acquisitions. EBIT amounted to EUR 5.6m (EUR 6.1m/6.3m Evli/cons.) and EBIT excl. NRI’s to EUR 5.1m. Profitability was below comparison period figures in all service areas, driven mainly by the impact of the industrial strike in Finland in December. Challenges in certain projects also affected profitability of the Software and Embedded Solutions service area. The BoD’s dividend proposal is EUR 0.35 per share (EUR 0.36 Evli/cons.)
Coronavirus prompts EBIT guidance cautiousness
Etteplan expects revenue to grow clearly in 2020 and EBIT to be at the same level or improve compared to 2019. The EBIT guidance was softer than expected, reflective of a more cautious approach due to uncertainty related to the coronavirus. Comments on general demand outlook were slightly more positive, with signs of pick-up following slightly decreased political uncertainty. We have lowered our 2020 EBIT estimate by some 7%, expecting a weaker Q1 due to the coronavirus.
HOLD with an ex-div target price of EUR 10.2
On our revised estimates and slightly increased caution due to the coronavirus uncertainty we adjust our target price to EUR 10.2 ex-div and retain our HOLD-rating, valuing Etteplan at 14x 2020 P/E.
Etteplan's net sales in Q4 amounted to EUR 71.8m, in line with our estimates and consensus (EUR 72.1m/72.7m Evli/cons.). EBIT amounted to EUR 5.6m, below our estimates and below consensus (EUR 6.1m/6.3m Evli/cons.). Dividend proposal: Etteplan proposes a dividend of EUR 0.35 per share (EUR 0.36 Evli/Cons.).
Etteplan will report Q4 results on February 11th. We expect Etteplan to finish the year on a positive note, although the industrial strike in December is expected to have had a minor negative impact. We expect revenue to grow 14.7% in Q4 and an EBITA-margin of 9.9%, near the comparison period figure. Guidance should reflect growth in revenue and operating profit. We expect a dividend proposal of EUR 0.36 per share. Following peer multiple appreciation, we raise our TP to EUR 10.6 (9.6) and retain our HOLD-rating.
Industrial strike expected to have a minor impact on figures
We expect Q4 revenue of EUR 72.1m, with growth of 14.7% y/y, driven by acquisitions made during mid-2019. We expect an EBITA of EUR 7.1m, at a margin of 9.9%. Some uncertainty in Q4 figures is brought by the industrial strike in Finland in December, which we expect to have had a minor negative impact on Q4 figures. Etteplan made two smaller acquisitions during the quarter within technical documentation, with some 50 employees combined, which will have a minor impact on growth in 2020. We expect a dividend proposal of EUR 0.36 per share.
Continued revenue and earnings growth expected in 2020
The outlook for 2020 remains somewhat hazy following demand uncertainties and a slightly slower organic growth during 2019. We expect Etteplans guidance for 2020 to at least reflect clear growth in revenue and EBIT compared to 2019, supported by the acquisitions made during 2019. A guidance reflecting significant growth this early in 2020 would be a positive sign. We expect a sales growth of around 10% and growth in EBIT of 8% in 2020.
HOLD with a target price of EUR 10.6 (9.6)
Valuation multiples for both peers and Etteplan have increased post-Q3 and current valuation does not appear particularly attractive, although Etteplan still remains on good track. We raise our target price with the increased peer multiples and value Etteplan at 15x 2019E P/E, for a target price of EUR 10.6 (9.6) and retain our HOLD-rating.
Etteplan’s Q3 results were better than expected, with both revenue and EBIT beating our estimates. EBIT was aided by net one-offs of EUR 0.8m, at EUR 5.7m (Evli 4.9m). Revenue growth was 17.0%, with a respectable 5.1% organic growth given continued market uncertainty. The comments on market outlook saw some continued signs of slow-downs, without any major changes. We retain our HOLD-rating with a target price of EUR 9.6.
Exceptional Q3 profitability boosted by one-offs
Etteplan’s Q3 results were better than we had expected. Revenue amounted to EUR 61.5m (Evli 59.1m), with the difference mainly due to higher sales in Engineering solutions. Growth was driven by acquisitions made during Q2-Q3/19, with revenue growth at 17.0% y/y, of which 5.1% organic growth. EBIT was above our expectations at EUR 5.7m (Evli 4.9m) due to non-recurring items of EUR 0.8m, including a EUR 1.1m impact from a revaluation of the earn-out in the Eatech acquisition. Challenges in Germany also continued to have an effect on profitability.
No major changes in market outlook
The market outlook continued to reflect the more challenging environment posed by uncertainty in the global economy. Comments on demand outlook point towards some slow-down and the situation in China continued to be challenging, with a decline in hours sold y/y. However, no signs of any larger deterioration in the overall demand situation was observable and according to Etteplan remained generally at a good level.
HOLD with a target price of EUR 9.6
Our top-line estimates remain largely unchanged post Q3. We have made some adjustments to our coming year estimates due to a readjustment of amortization of acquisition fair value adjustments, with our 2020-2021 EBIT estimates down by some 5%. With only minor estimates revisions and the continued uncertainty in demand outlook, we retain our HOLD-rating with a target price of EUR 9.6.
Etteplan's net sales in Q3 amounted to EUR 61.5m, slightly above our estimates and in line with consensus (EUR 59.1m/60.4m Evli/cons.). EBIT amounted to EUR 5.7m, above our and consensus estimates (EUR 4.9m/4.9m Evli/cons.), in line with our and consensus estimates after excluding EUR 0.8m one-offs.
Etteplan reports Q3 results on October 31st. The guidance revision in Q2 and steady development track should limit information value from financial figures of the seasonally slower quarter. Macro uncertainties, however, continue to pose a risk on demand. The acquisitions made during mid-2019 will bolster growth while opening some room for estimates deviations. Market outlook comments remain of key interest but will likely remain limited given the near-term uncertainties relating to the trade war and Brexit.
Acquisitions to boost growth in seasonally slower quarter
Etteplan raised its guidance in Q2, largely due to acquisitions made in mid-2019, expecting revenue and EBIT for 2019 to grow significantly compared to 2018. With the revised guidance and the stable development that Etteplan has shown, results of the seasonally slower Q3 should not be particularly eventful, although the recent acquisitions may likely cause some estimates deviation due to lack of comparison figures. We expect revenue to amount to EUR 59.1m, with a growth of 12.5%. We expect over 10% growth in all service areas, with Engineering Solutions in particular boosted by the acquisitions. We expect an EBITA-margin of 9.3%.
Market outlook comments remain of interest
Our interest in the Q3 results will remain focused on remarks regarding market outlook and any possible comments on the outlook for 2020, as we are rather confident in the 2019 guidance being reached. Given the near-term nature of key uncertainties (Brexit and U.S-China trade war) forward-looking comments will likely still be limited. Some small positive signs have been seen post-Q3 but without agreements the uncertainty will likely continue to have an effect on investment decisions.
HOLD with a target price of EUR 9.6
We have not made changes to our estimates ahead of Q3. We retain our HOLD-rating and target price of EUR 9.6 intact.
Etteplan’s Q2 results were slightly below our and consensus estimates but at a good level nonetheless. Etteplan upgraded its guidance mainly driven by the acquisitions made. The market comments were mostly unchanged, with some hints of weakened demand. We retain our HOLD rating with a target price of EUR 9.6.
Below estimates, acquisition driven guidance upgrade
Etteplan’s Q2 results were slightly below our and consensus estimates, but continued to be at a good level nonetheless. Revenue grew 3.7% to EUR 64.3m (Evli/cons. 66.6m/66.4m), with organic growth falling clearly to 1.2%, although impacted by working day differences. Profitability surpassed the target level, with EBITA at 6.5m (Evli 6.9m) for a margin of 10.1%. Etteplan further upgraded its guidance (prev. upgrade in Q1) following the acquisitions made during Q2/Q3, expecting its revenue and operating profit for 2019 to grow significantly (prev. clearly) compared to 2018. Market outlook comments were mostly neutral compared to Q1, with some signs of negative development for instance in China.
No major estimates revisions
Our estimates remain mostly unchanged post-Q2, as we had already included the acquisitions in our estimates. Profitability of the acquired companies had not been given pre-Q2 but management comments implied similar profitability to Etteplan or possibly better when accounting for synergies, in line with our expectations. We expect revenue growth of 11.4% in 2019 (2018: 10.1%) and an EBITA-margin of 9.9% (2018: 9.5%).
HOLD with a target price of EUR 9.6
The prevailing uncertainty in customer activity and the lower organic growth in Q2, although affected by working day differences, gives continued reasons for caution while the upgraded guidance did reduce some near-term uncertainty. With no major changes to our estimates, we retain our HOLD-rating and target price of EUR 9.6.
Etteplan delivered solid Q2 results, although slightly below Evli and consensus estimates. Etteplan's net sales in Q2 amounted to EUR 64.3m, slightly below our and consensus estimates (Evli/cons. EUR 66.6m/66.4m). EBITA amounted to EUR 6.5m compared to our estimates (Evli EUR 6.9m). Etteplan upgraded its guidance, expecting the revenue and operating profit (EBIT) for the year 2019 to grow significantly (prev. clearly) compared to 2018.
Etteplan will report Q2 results on August 13th. Etteplan has during and after the quarter made acquisitions with a combined number of employees of over 250, expected to have an insignificant impact on Q2 but to aid in achieving the FY2019 guidance amid continued global uncertainty. We expect minor overall margin improvement y/y in Q2 while still remaining cautious to margin development in Technical Documentation Solutions. Following the post-Q1 share price rally we downgrade our rating to HOLD (BUY) with a target price of EUR 9.6.
Executing its M&A aided growth strategy
Our estimates ahead of Q2 remain intact apart from adjustments made for the acquisitions of Devex Mekatronik (Sweden) and EMP Engineering Alliance (Germany). The two companies combined had revenue of around EUR 26m and over 250 employees in 2018. To our understanding the revenue generated will mainly fall under Engineering Solutions and a smaller share under Software and Embedded Solutions. Our 2019 and 2020 net sales estimates are up by some 3% and 8% respectively. For Q2 we expect net sales and EBITA of EUR 66.6m (Q2/18: 62.0m) and EUR 6.9m (Q2/18: 6.2m).
Market outlook comments of interest
Etteplan expects its revenue and operating profit for 2019 to grow clearly compared to 2018. The acquisitions made will certainly aid in achieving the guidance and reduces 2020 sales growth concerns, but recent macro development still warrants cautionary remarks and our focus in the Q2 report will be on market outlook comments.
HOLD (BUY) with a target price of EUR 9.6
Etteplan’s share price has climbed after the Q1 guidance upgrade and although still at a slight discount to peers, valuation is looking fairer when also considering Etteplan’s historical valuation. We downgrade our rating to HOLD (BUY) and retain our target price of EUR 9.6.
Etteplan’s Q1 saw all business areas achieving margins near the financial target of a 10% EBITA-margin. With a good order backlog development during the beginning of the year Etteplan also raised its guidance for 2019. We expect a 2019 revenue and EBITA of EUR 258.6m and 26.0m respectively. We retain our BUY rating with a target price of EUR 9.6 (9.0).
Good performance across the board and guidance upgrade
Etteplan’s Q1 results were good across the board, with especially profitability beating our estimates, driven by better than expected profitability in Engineering Solutions and Technical Documentation Solutions. Revenue also saw good growth of 11.3% in the quarter following a continued good demand situation despite market uncertainties. Etteplan upgraded its guidance, expecting the revenue and operating profit for 2019 to grow clearly (prev. only grow) compared to 2018.
Technical Documentation Solutions still faces challenges
Etteplan’s Q1 results showed little weakness, as although the on-going trade war did have some impact on the development in China, the significant new orders signed, the guidance upgrade and customer order backlog development alleviate some of the near-term uncertainty. The Technical Documentation Solutions business area remains the likely subpar performer due to elevated costs related to a larger project in Germany. Our revised revenue and EBIT estimates are 258.6m and 23.4m respectively, implying an increase of 9.4% and 12.4% from 2018 figures.
BUY with a target price of EUR 9.6 (9.0)
On our estimates Etteplan trades at a 26% and 12% discount on 2019E peer median EV/EBITDA and P/E. With our increased estimates and lesser near-term uncertainty we raise our target price to EUR 9.6 (9.0), valuing Etteplan at a P/E and EV/EBITDA of 13.5x and 7.6x respectively, and retain our BUY-rating.
Etteplan’s Q1 results beat expectations especially for profitability, with EBIT at EUR 5.8m (EUR 5.2m/5.1m Evli/cons.) and revenue at EUR 65.6m (EUR 63.5m/64.0m Evli/cons.). Performance was solid across all business areas. Etteplan upgraded its guidance and now expects its revenue and operating profit for the year 2019 to grow clearly compared to 2018.
Etteplan reports Q1 results on May 8th. We expect continued good margin development in Engineering Solutions, and Software and Embedded Solutions. Project delivery challenges are expected to continue to have an impact on margins in Technical Documentation Solutions. With valuation looking more attractive due to peer multiple elevation we upgrade to BUY (HOLD) with a TP of EUR 9.0.
Expect stable development
Our estimates ahead of Q1 remain largely intact, with some minor adjustments mainly to incorporate the transition from EBIT from business operations to EBITA as Etteplan’s measure for operational profitability following updated strategic and financial targets in April. Our group level Q1 revenue and EBITA estimates are at EUR 63.5m and EUR 5.8m respectively. We expect continued good margins in Engineering Solutions and Software and Embedded Solutions while still remaining cautious to margin improvement in Technical Documentation Solutions due to project delivery challenges in Germany.
Uncertainty has decreased but remains a key topic
The uncertainty relating to the development of the global economy remains a key topic as the development of macroeconomic indicators and sentiment has been mixed but in general more positive considering the uncertainty during the latter half of 2018. Both customer engineering companies’ and peers’ valuation have been on the rise during 2019. The order intake among engineering companies has also been positive, with the aggregate value for a selection of customer companies up some 7% y/y.
BUY (HOLD) with a target price of EUR 9.0
The valuation of peer companies has been on the rise during 2019, while Etteplan has been largely unaffected, and as such trades on a discount compared to peers. On 2019E P/E Etteplan trades at an in our view unjustifiably large discount of ~20%. We retain our target price of EUR 9.0 but upgrade our rating to BUY (HOLD).
Etteplan posted good Q4 results, although slightly below our estimates, with net sales at EUR 62.9m (Evli 66.0m) and EBIT at 5.7m (Evli 6.2m), affected at least partly by the impact of vacation timing and activities of two major customers in December. The market outlook remains encouraging and Etteplan expects revenue and operating for 2019 to grow compared to 2018. Our estimates remain largely unchanged and we retain our HOLD-rating with a target price of EUR 9.0.
Market outlook and guidance remaining favourable
Etteplan posted good Q4 results, although falling slightly below our estimates due at least partly to the impact of vacation timing and activities of two major customers in December. The Technical Documentation continued to see challenges while Embedded Systems and IoT saw solid development, as actions to improve profitability have taken effect. Etteplan expects the revenue and operating profit for the year 2019 to grow compared to 2018. Comments regarding the market outlook were encouraging, as Etteplan continues to see favorable development in all market areas but with demand growth in Europe expected to slow down slightly. The BoD’s dividend proposal for 2018 is EUR 0.30 per share, in line with expectations.
Estimates largely unchanged post-Q4
Our estimates remain largely unchanged post-Q4. We have raised our estimates for profitability for Embedded Systems and IoT after the solid performance in Q4. We expect net sales and EBIT BO of EUR 251.6m and EUR 24.7m respectively, with margins near Etteplan’s strategic target of 10%. We do not expect the growth target of 15% to be reached without acquisitions.
HOLD with a target price of EUR 9.0
On our estimates Etteplan trades largely in line with peers on 2019E EV/EBIT and P/E. With our estimates largely unchanged we retain our HOLD-rating with a target price of EUR 9.0.
Etteplans Q4 revenue (EUR 62.9m/66.0m Act./Evli est.) and EBIT (EUR 5.7m/6.2m Act./Evli est.) fell slightly below our estimates but remained at good levels nonetheless. Etteplan expects its revenue and operating profit for the year 2019 to grow compared to 2018. The BoD proposes a dividend of EUR 0.30 per share (Evli EUR 0.30).
Etteplan reports Q4 results on February 7th. With signs of slower growth in the global economy the market outlook and guidance are of key interest. We expect the Q4 results to show good performance, with our revenue and EBIT BO estimates at EUR 66.0m and 6.7m (Q4/17: 58.5m and 5.4m) respectively. We expect a dividend proposal of EUR 0.30 per share. With valuation looking fairer after share price inclines we downgrade to HOLD (BUY) with a target price of EUR 9.0.
Comments on market outlook and guidance of key interest
The growth in the global economy has been showing signs of slowdowns due to among other things the US-China trade war and changes in GDP growth forecasts for the near-term have been seeing a slightly declining trend. An adverse shift in engineering companies’ willingness to make investments would have an effect on the engineering services sector. As the effect of any weaker demand is not yet clearly comprehensible Etteplan’s comments on the market outlook along with the guidance for 2019 are of key interest. Despite increased uncertainty we still expect guidance to reflect growth in revenue and operating profit.
Expect DPS proposal of EUR 0.30
Our estimates ahead of Q4 remain intact. Our Q4 revenue and EBIT BO estimates are at 66.0m and 6.7m respectively. Etteplan has not specified a dividend policy but as the dividend has typically corresponded to around 50 % of EPS, we expect a dividend proposal of EUR 0.30 per share.
HOLD (BUY) with a target price of EUR 9.0
Etteplan’s share price has seen increases during 2019 and valuation when comparing to peers seems fair. We value Etteplan at 8.8x 2019E EV/EBITDA. We downgrade our rating to HOLD (BUY) with a target price of EUR 9.0.
Etteplan has seen favourable development in the past few years following improving market conditions. Market uncertainty has increased recently and we expect organic growth figures to slow down going in to 2019. Acquisitions remain essential in achieving the 15 % average growth target. Margins are close to the 10 % EBIT from business operations target, under some pressure but with room for improvements. We retain our BUY-rating with a target price of EUR 9.0 (9.5).
Market uncertainty casting a shadow on sales growth
Etteplan’s revenue in 2017 and during Q1-Q3/2018 increased by 16.8 % and 11.1 %, of which organic growth amounted to 10.4 % and 7.6 %, supported by improved market conditions from early 2017 onward. With some uncertainty relating to market development visible we expect organic growth to slow down going in to 2019 and achieving the target of an average growth of 15% would in our view require further acquisitions.
Margins near 10 % target
Etteplan has during 2018 been able to achieve group EBIT from business operations margins of close to the 10 % target (9.1 % during Q1-Q3/2018). A key driver for profitability has been Engineering Services due to the good demand situation and improved operational efficiency. We see some pressure on the already exceptionally good margins in the service area, while Embedded Systems and IoT as well as Technical Documentation in our view still have room for margin development.
BUY with a target price of EUR 9.0
Compared to peer 2019E and 2020E multiples Etteplan trades at a discount. Increased uncertainty in coming years market development warrants some caution but the ’19- ‘20E discount of ~20 % to peer ‘19E and ‘20E EV/EBITDA does not appear justified. We value Etteplan at 8.8x 2019E EV/EBITDA, giving a target price of EUR 9.0 (9.5) and BUY recommendation.
Etteplan’s Q3 results on group level were quite in line with our estimates. Engineering services and Embedded Systems and IoT continued to improve, while Technical documentation saw continued problems in Germany. The market outlook remains favourable albeit with increased uncertainty. We retain our BUY-rating with a TP of EUR 9.5 (10.0).
Etteplan’s Q3 results were on group level quite in line with our expectations. Revenue amounted to EUR 52.6m (Evli EUR 54.5m) and EBIT from business operations EUR 4.8m (Evli EUR 4.7m). Engineering services continued on a very good track, with sales growth of 11.4 % and an EBIT BO margin of 10.0 %. The measures to improve profitability in Embedded Systems and IoT have shown results and the EBIT BO margin increased to 9.8 % (7.4 % in Q3/17). Technical documentation was weighed down by continued challenges in Germany, with the EBIT BO margin at 8.0 %.
Market outlook remains favourable, increased uncertainty
No major changes were noted in the market outlook, although uncertainty has increased, and Etteplan expects a favourable end of the year. We have not made any major changes to our estimates. We remain cautious to improvements in profitability in Engineering services due to already solid levels. We expect improvement in Technical documentation as the problems in Germany appear to have been alleviated. Embedded Systems and IoT has seen improvements but still lies below previously achieved levels. The availability of professionals in the area is limiting growth and we see continued M&A activity in the area as likely. Our 2018 net sales and EBIT BO estimates are EUR 239.5m and EUR 22.9m respectively.
BUY with a target price of EUR 9.5 (10.0)
Etteplan trades on a ~20 % and ~15% discount on 19E EV/EBITDA and P/E, which we do not consider as justifiable. We retain our BUY-rating with a target price of EUR 9.5 (10.0)
Etteplan posted solid Q3 results, largely in line with our estimates. Net sales amounted to EUR 52.6m (Evli 54.5m) and EBIT from business operations was EUR 4.8m (Evli 4.7m). Development was good in Engineering services and Embedded Systems and IoT, while Technical documentation continued to see some weakness. The demand situation is expected to remain good throughout the end of year despite some market uncertainty.
Etteplan reports Q3 earnings on October 30th. Etteplan has apart from smaller problems in the Technical documentation and Embedded Systems and IoT business areas seen steady progress and we do not expect Q3 to have changed the trend. Profitability in Engineering Services has reached solid levels and we expect to see margin development slowing down in the near future. With recent share price development valuation looks more attractive. We upgrade to BUY (HOLD) with a TP of EUR 10.
Profitability at healthy levels, still room for improvement
Etteplan’s EBIT from business operations margin improved to 9.7 (8.6 in Q2/17) per cent in Q2/18, driven by profitability developments in Engineering Services, while margins in Technical documentation and Embedded Systems and IoT saw flattish development y-on-y. The EBIT BO margin in Engineering services reached 10.7 % and has according to management reached solid levels. We expect margin improvement in Embedded Systems and IoT due to a weaker comparison period. In Technical documentation delays in a significant project delivery has impacted on margins and we expect this to still have some effect on Q3.
Seasonally slower quarter
We have not made changes to our estimates ahead of Q3. Market conditions have remained favorable and along with the acquisition of Eatech we expect continued good growth in Q3. Our net sales and EBIT BO estimates for Q3 are EUR 54.5m and EUR 4.7m respectively.
BUY (HOLD) with a target price of EUR 10
Following recent share price development valuation again looks more favourable. We upgrade to BUY (HOLD) with a target price of EUR 10.
|Shareholders||Date||% of shares||% of votes|
These research reports have been prepared by Evli Research Partners Plc (“ERP” or “Evli Research”). ERP is a subsidiary of Evli Plc.
None of the analysts contributing to this report, persons under their guardianship or corporations under their control have a position in the shares of the company or related securities. The date and time for any price of financial instruments mentioned in the recommendation refer to the previous trading day’s closing price(s) unless otherwise stated in the report. Each analyst responsible for the content of this report assures that the expressed views accurately reflect the personal views of each analyst on the covered companies and securities. Each analyst assures that (s)he has not been, nor are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report.
Companies in the Evli Group, affiliates or staff of companies in the Evli Group, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned in the publication or report. Neither ERP nor any company within the Evli Group have managed or co-managed a public offering of the company’s securities during the last 12 months prior to, received compensation for investment banking services from the company during the last 12 months prior to the publication of the research report.
ERP has signed an agreement with the issuer of the financial instruments mentioned in the recommendation, which includes production of research reports. This assignment has a limited economic and financial impact on ERP and/or Evli. Under the assignment ERP performs services including, but not limited to, arranging investor meetings or –events, investor relations communication advisory and production of research material. ERP or another company within the Evli Group does not have an agreement with the company to perform market making or liquidity providing services. For the prevention and avoidance of conflicts of interests with respect to this report, there is an information barrier (Chinese wall) between Investment Research and Corporate Finance units concerning unpublished investment banking services to the company. The remuneration of the analyst(s) is not tied directly or indirectly to investment banking transactions or other services performed by Evli Plc or any company within Evli Group.
This report is provided and intended for informational purposes only and may not be used or considered under any circumstances as an offer to sell or buy any securities or as advice to trade any securities.
This report is based on sources ERP considers to be correct and reliable. The sources include information providers Reuters and Bloomberg, stock-exchange releases from the companies and other company news, Statistics Finland and articles in newspapers and magazines. However, ERP does not guarantee the materialization, correctness, accuracy or completeness of the information, opinions, estimates or forecasts expressed or implied in the report. In addition, circumstantial changes may have an influence on opinions and estimates presented in this report. The opinions and estimates presented are valid at the moment of their publication and they can be changed without a separate announcement. Neither ERP nor any company within the Evli Group are responsible for amending, correcting or updating any information, opinions or estimates contained in this report. Neither ERP nor any company within the Evli Group will compensate any direct or consequential loss caused by or derived from the use of the information represented in this publication.
All information published in this report is for the original recipient’s private and internal use only. ERP reserves all rights to the report. No part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in any retrieval system of any nature, without the written permission of ERP.
This report or its copy may not be published or distributed in Australia, Canada, Hong Kong, Japan, New Zealand, Singapore or South Africa. The publication or distribution of this report in certain other jurisdictions may also be restricted by law. Persons into whose possession this report comes are required to inform themselves about and to observe any such restrictions.
Evli Plc is not registered as a broker-dealer with the U. S. Securities and Exchange Commission (“SEC”), and it and its analysts are not subject to SEC rules on securities analysts’ certification as to the currency of their views reflected in the research report. Evli is not a member of the Financial Industry Regulatory Authority (“FINRA”). It and its securities analysts are not subject to FINRA’s rules on Communications with the Public and Research Analysts and Research Reports and the attendant requirements for fairness, balance and disclosure of potential conflicts of interest. This research report is only being offered in U.S. by Auerbach Grayson & Company, LLC (Auerbach Grayson) to Major U.S. Institutional Investors and is not available to, and should not be used by, any U.S. person or entity that is not a Major U.S. Institutional Investor. Auerbach Grayson is a broker-dealer registered with the U.S. Securities and Exchange Commission and is a member of the FINRA. U.S. entities seeking more information about any of the issuers or securities discussed in this report should contact Auerbach Grayson. The securities of non-U.S. issuers may not be registered with or subject to SEC reporting and other requirements.
ERP is not a supervised entity but its parent company Evli Plc is supervised by the Finnish Financial Supervision Authority.
Revenue for the full year 2023 is expected to be EUR 360-390m and the operating profit is expected to amount to EUR 28-33m.
Growth: revenue more than EUR 500m in 2024, of which over 50% from outside Finland. Profitability: 10 per cent operating profit (EBITA) of revenue. Managed Services: 75 per cent of revenue represented by Managed Services in 2024
For professional investors wishing to discuss the case, please book a complimentary analyst call