Original-Research: Avemio AG - from GBC AG

Classification of GBC AG to Avemio AG

Company Name: Avemio AG
ISIN: DE000A2LQ1P6

Reason for the research: Research Report (Anno) Recommendation: BUY
Target price: 23,00 EUR
Target price on sight of: 31.12.2025
Last rating change:
Analyst: Cosmin Filker; Niklas Ripplinger

- Transformation into a media technology group is being driven forward - Improvement in profit margins expected  
With the presentation of the consolidated figures for the first time, Avemio AG reported sales of € 99.15 million for the past financial year 2023. Although no comparative figures are available for the 2022 financial year, the pro forma figures we have calculated (revenue according to GBC calculation: € 108.70 million) indicate a downward business trend. The company had originally assumed sales of € 120 million for the past financial year.
 
The lower-than-expected sales trend is due in particular to weaker demand in the second half of the year, reflecting the low propensity to invest as a result of the economic situation. Overall, demand was lower, particularly for higher-priced equipment and on the consumer side. This was exacerbated by a lack of innovation and therefore a lack of incentives to buy. Finally, the high level of investment during the coronavirus pandemic led to pull-forward effects.
 
As expected, EBITDA was also below expectations at € -0.05 million (previous year according to GBC calculation: € 4.44 million) (Avemio guidance: € 5 million). While the gross profit margin remained stable, operating expenses rose disproportionately to gross profit. Among other things, this is due to the expansion of personnel capacities and increased product development costs for the Avemio companies focussing on digital services. Lower than expected sales from these start-ups were also accompanied by a lack of earnings contributions.  
According to the company's guidance, sales growth of between 1% and 4% is to be achieved in the current 2024 financial year. EBIT (2023: € -2.61 million) is expected to increase disproportionately to break-even level. While sales in the retail business are expected to decline by 2% due to the ongoing reluctance to invest, sales in the media technology segment are expected to increase. The expansion of the media technology segment is in any case an important pillar of the corporate strategy, which aims to improve customer loyalty on the one hand and increase the quality of earnings on the other. This strategic component is very well represented by the acquisition of MoovIT GmbH, with which the product range was expanded to include the areas of system integration and software development as well as consulting services for the optimisation and automation of video workflows. However, in-house developments driven by majority-owned start-ups will also contribute to the planned change.  
For the current financial year, we expect sales revenue of € 101.14 million (sales growth: 2.0%) and also assume constant sales growth of 7.0% p.a. for the coming financial years (2025 and 2026). The full-year inclusion of the media technology subsidiary MoovIT and the marketing of the digital products developed by Avemio AG should lead to an improvement in the profit margin. In addition, Avemio AG has implemented cost-cutting measures that should take full effect from 2025 in particular. We expect the EBIT margin to improve to 6.1% by 2026.
 
We have determined a new price target of € 23.00, which corresponds to a reduction of the previous price target of € 32.00. The lower price target results from the reduced forecasts for the current financial year 2024, which have led to a reduction in the estimates for the coming financial years. We have also reduced our long-term target EBITDA margin expectation to 10.0% (previously: 11.6%). We continue to assign a BUY rating.  

You can download the research here:
http://www.more-ir.de/d/30213.pdf

Contact for questions
GBC AG
Halderstraße 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Disclosure of potential conflicts of interest pursuant to Section 85 WpHG and Art. 20 MAR The company analysed above has the following potential conflict of interest: (5a,11); A catalogue of potential conflicts of interest can be found at https://www.gbc-ag.de/de/Offenlegung
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Date and time of completion of the study: 15.07.2024 (08:39 am) Date and time of publication of the study: 15.07.2024 (10:00 am)

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The issuer is solely responsible for the content of this research. The result of this research does not constitute investment advice or an invitation to conclude certain stock exchange transactions.