Original-Research: Einhell Germany AG - from NuWays AG

Classification of NuWays AG to Einhell Germany AG

Company Name: Einhell Germany AG
ISIN: DE0005654933

Reason for the research: Update
Recommendation: Kaufen
from: 23.05.2024
Target price: EUR 227.00
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Mark Schüssler

Q1 in line with expectations // FY24e guidance confirmed

Einhell released Q1 results in line with expectations, showing healthy top and bottom line growth versus Q1’23 and Q4’23. Despite an ongoing depressed consumer sentiment, sales grew by 7.8% yoy to € 270m (eNuW: € 265m), driven by higher demand for the company’s Power X-Change products (+9ppts yoy to 50% PXC share), particularly pronounced in DACH, where sales grew by 9.6% yoy to € 110m (PXC share +13ppts to 62%). While Western Europe declined by 12% yoy, sales in in Eastern Europe continued to perform well, growing 16% yoy after 18% growth in Q4’23; overseas market showed solid growth of 11% yoy, while at the same time recovering sequentially (-17% in Q4).

EBT increased by 11% yoy to € 22.6m (eNuW: € 20.9m) with the margin increasing 0.2ppts yoy to 8.4%, mainly due to operating leverage, offset by PPA effects with regards to the company’s acquisitions in Canada and Thailand. Furthermore, the gross margin decreased by 1ppt to 35.8% due to easing but still noticeable cost inflation. Personnel expenses increased by 8.4% as an elevated employee base in combination with the acquisitions in Thailand and Vietnam weighed on operating profitability. Having said that, along with Q1’23, the Q1’24 EBT margin of 8.4% still marks a considerable improvement to EBT margins pre-Covid (+2.4ppts from 6%) and Covid (+0.8ppts from 7.6%) and a decent inventory management (c. -18% yoy to € 341m in Q1) should indicate fewer promotional activities going forward.

With that, Einhell confirmed its FY24e guidance of 6% sales growth yoy to around € 1,030m (eNuW: € 1,030m) and an EBT margin of 7.5-8% (eNuW: 7.9%). In our view, this looks achievable as the healthy sales growth and solid EBT profitability in Q1 should provide confidence, aided by a less challenging H2’23 comparable base. The key margin drivers should be easing freight costs and raw materials prices as well as long-term currency hedging to avoid extreme fluctuations in purchase prices.

After two promising acquisitions in Thailand and Vietnam in 2023, Einhell reiterated its commitment to further international expansion with a particular focus on a potential US market entry that should provide the company access to the largest DIY market globally. Given that Einhell has a sound track record of expanding internationally via M&A, rolling-out its leading Power X-Change platform in this market should drive further market share gains. While short-term macro challenges continue to weigh on operating performance in FY24e, Einhell remains a key beneficiary of the structural transition towards cordless power tools. We reiterate our BUY rating with an unchanged PT of € 227, based on DCF.

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Web: www.nuways-ag.com
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LinkedIn: https://www.linkedin.com/company/nuwaysag Adresse: Mittelweg 16-17, 20148 Hamburg, Germany ++++++++++
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