da Intermonte – TXT E-SOLUTIONS company research report

Buon pomeriggio,

di seguito e in allegato inviamo il company research report relativo a TXT E-SOLUTIONS a cura di Intermonte.

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Un caro saluto

Laura Morreale

M: +39 3273435530

Better-Than-Expected 4Q23 Figures, Positive View Confirmed

• Preliminary FY23 revenues and EBITDA slightly above our estimates. If we focus on 4Q23, revenues were up 11% YoY (c.7% organic) to Eu64.7mn and 3.5% better than expected. The positive surprise came from the digital advisory business unit that benefitted from the award of important tenders in the public administration sector and grew by 34% YoY organically to Eu12.4mn. Smart Solutions (Eu13.2mn) and Software Engineering (Eu39.3mn) grew at a more moderate pace, in line with forecasts. Quarterly EBITDA was up 16% YoY to Eu10.1mn, 1.6% ahead of our estimates and with a 15.6% margin on sales, broadly in line with our forecasts. For the time being the company is not reporting a breakdown of EBITDA by business segment. We remind that results will be approved on 14 March 2024.
• Management outlook. Comments provided by management for 2024 are positive, in particular for the Digital Advisory business. Focus remains on pursuing organic growth and on signing new M&A deals. We expect management to confirm an EBITDA margin above 14%, not only thanks to organic growth rates but also thanks to continuous efficiencies in the organisational structure. In the Smart Solutions division, the contribution from recently-acquired Embedded Graphics has been consolidated as of 4Q23, while the most recent acquisition, Fastcode, entered the consolidation base in December 2023.
• Change in estimates. In this report we are adding the contribution from the recently-acquired FastCode (which generated Eu10.5mn of turnover with a 15% EBITDA margin in FY23). Below EBITDA, we are slightly raising our D&A and financial charges accordingly. All in all, we are raising 2024 and 2025 EPS by 2.3% and 3.0% respectively. In terms of the YE23 net financial position, we are including the impact of the FastCode acquisition, the continuation of the buyback programme but also slightly higher NWC absorption.
• OUTPERFORM, target from Eu22.0 to Eu25.1. Preliminary FY23 figures were positive and provide support to our view on the stock, which should remain well placed in 2024 to continue to benefit from both organic growth and new M&A deals. Our 8% organic assumption for this year is reasonably cautious. We remind that TXT has good financial flexibility thanks to more than 10% of its capital being in treasury shares and thanks to the possibility to monetise the non-core investment in Banca del Fucino (with a book value of Eu16.5mn). Our target revision is mainly explained by assuming a 50bp lower risk-free rate but also reflects the positive change in estimates.