Original-Research: INDUS Holding AG (von NuWays AG): Buy

Classification of NuWays AG to INDUS Holding AG

Company Name:	INDUS Holding AG
ISIN:	DE0006200108
Reason for the research:	Update
Recommendation:	Buy
from:	13.11.2024
Target price:	EUR 34.00
Target price on sight of:	12 months
Last rating change:
Analyst:	Christian Sandherr

Final Q3 results out // 2nd buyback offer announced; chg. est.

Topic: INDUS released its final Q3 numbers in line with preliminary results. Even more importantly, the company announced a public buyback offer in the period from 12-25 November 2024 up to € 15.2m.

To recap: Q3 sales decreased slightly by 3.6% to € 443m due to a challenging macro environment and low order backlog. Reported EBIT remained roughly unchanged yoy at a solid € 31.8m with a 7.2% EBIT margin. However, adjusted for impairments of € 6.7m in Q3’24 and € 17.6m in Q3’23, EBIT decreased by 22%. Personnel costs increased slightly by 0.6% yoy to € 129.4m despite a lower headcount (-1.6% yoy of continuing operations) due to a notable rise in wages and salaries. Cost of materials increased 1.4% yoy to € 195m with a 1.3pp increase in the cost ratio from a low comparable base.

Order intake remained unchanged yoy at € 392m (€ 391 in Q3’23) but on a low level due to a weak economic situation in the metal production and processing sectors. This leads to an order backlog of € 678m (vs. € 711m end of FY23). While the demand situation stopped declining and consolidated now on a low level (€ 1,220m order intake 9M’24 vs. € 1,230m in 9M’23), the book to bill ratio is still slightly below 1.00 (0.95 in 9M’24). However, we estimate that INDUS has already overcome the low point, and we should see successive improvements for FY25e.

Buyback offer announced: already in February, INDUS acquired 1.1m shares at a price of € 23 per share in a public buyback offer, amounting to 4.1% of its share capital, which are still held as treasury shares. The company announced now a second buyback offer at € 21.65 per share for 0.7m shares in the period from 12-25 November. In addition, INDUS intends to buy for up to € 5m, but no more than 0.2m shares on the open market between 2 December 2024 at the earliest and until 16 May 2025 at the latest. If both programs are conducted successfully, INDUS would hold up to 7.4% in treasury shares. According to management, shares from the second tender offer and the open market transaction will be cancelled. This is positive news, as the stock is clearly undervalued in our view and hence repurchasing shares offers an attractive return on invested capital compared to other capital allocation choices.

Strong FCF: management confirmed the FCF outlook for FY24e of above € 110m. INDUS achieved € 71.9m FCF in 9M’24, € 34.2m lower than last year but still on a solid level. Further, FCF in 9M’23 includes a positive one-time effect of € 14.4m from a property sale. The FY target of € 110m looks plausible in our view (eNuW: € 115m), as working capital tends to come down in Q4 due to seasonal effects. With that, INDUS should deliver a strong FCFY’24e of c. 10%.

2025 outlook: According to management, the geopolitical and macroeconomic challenges should continue to exist in FY25e. However, compared to Q1’24, the situation has already visible improved. Thus, we expect to see a moderate top-line improvement for FY25e of 5.4% to € 1810m, of which € 40-50m should be contributed from M&A acquisitions in FY24e and FY25e as stated by management. Further, we expect EBIT to improve disproportionately to € 150m in FY25e (eNuW) due to less expected impairments and macroeconomic improvements.

Nevertheless, INDUS has shown resilience even in an adverse business environment. On top of that, INDUS is trading at only 8x forward P/E (eNuW), offers an expected dividend yield of 5.8% (eNuW FY24e: € 1.2 per share), and delivers a strong FCFY24e of c. 10% (eNuW). Hence, we keep INDUS as one of NuWays’ Alpha Picks and reiterate BUY with an unchanged PT of € 34, based on FCFY’24e.

You can download the research here: http://www.more-ir.de/d/31299.pdf
For additional information visit our website: www.nuways-ag.com/research

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
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.
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