Buy
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Original-Research: q.beyond AG - from NuWays AG
Classification of NuWays AG to q.beyond AG
Profitable growth ahead after transitionary FY24e After a rather uninspiring operating performance in FY23, FY24e is seen to have already benefited significantly from the imposed efficiency measures, leading to substantial bottom-line improvements. In fact, EBITDA is seen to improve by a whopping 286% to € 9.3m (FY23 EBITDA adjusted for positive effects in connection with favorable decisions by tax authorities) on the back of an improved nearand off-shore ratio as well as a higher utilization in the consulting segment. That being said, like in the previous year the company is expected to release preliminary FY figures in early March (final: 31st March), as well as an initial guidance for FY25e. As management repeatedly stated, we expect the outlook to target continued FCF expansions (eNuW: € 9.8m) as well as positive net income (eNuW: € 2.1m) alongside mid-SD sales growth (eNuW: +5.9%). Besides this, the company already provided an EBTIDA margin target of 7-8% (eNuW: 7.1%) for FY25e. The main driver behind the continuous margin expansion should be the ongoing implementation of one.q.beyond as well as the Strategy 2025, with which management is setting three strategic priorities. (1) Ongoing focus on key verticals (retail, logistics, manufacturing) coupled with an increased focus on consulting and development, which in the end facilitates gaining new orders for operations. (2) Further increasing the near- and off-shoring ratio to 20+% (Q3’24: 13%, mid-term target: 30+%), allowing for gross margin expansion. According to the rule of thumb, a 5pp increase in near- and off-shoring leads to a 1pp increase of the gross margin. (3) Higher emphasis on AI in all business areas (1st level service, development & resource planning) allowing for a reduced fixed cost base. While some off those measures already borne fruit, visible in the improved profitability and cash generation in FY24e, we expect further efficiency potential to unfold from 2025e onwards, which should allow for EBITDA margins of 10+% in the mid-term (eNuW). In addition, we expect the company to close at least one acquisition in FY25e based on management’s indications as well as the strong net cash position of € 36m. Here, it seems likely that management targets to enter new verticals (i.e. public sector, energy, healthcare) or regional markets. In our view, targets should be in the range of € 10-20m sales as well as cash generative. Mind you, future M&A is not reflected in our model and is thus providing upside to our estimates. That said, the investment case remains fully intact as operations are set to further improve going forward. Moreover, trading at only 3.1x EV/EBITDA FY25e, the stock looks undoubtedly cheap. We hence reiterate BUY with an unchanged € 1.10 PT based on DCF. You can download the research here: http://www.more-ir.de/d/31661.pdf For additional information visit our website: https://www.nuways-ag.com/research-feed Contact for questions: NuWays AG - Equity Research Web: www.nuways-ag.com Email: research@nuways-ag.com LinkedIn: https://www.linkedin.com/company/nuwaysag Adresse: Mittelweg 16-17, 20148 Hamburg, Germany ++++++++++ Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss bestimmter Börsengeschäfte. Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse. ++++++++++
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