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:	19.11.2024
Target price:	EUR 34.00
Target price on sight of:	12 months
Last rating change:
Analyst:	Christian Sandherr

RT feedback: Strong FCF and well filled M&A pipeline

Topic: On Monday we hosted a digital roundtable with INDUS, here are our key takeaways.

M&A pipeline well filled: INDUS expects to see another deal to sign within the Infrastructure segment this year. However, the purchase price is likely not to be paid until FY25e. Further, INDUS has in prospect to spend around € 50-70m on M&A next year. Considering the recent decline in acquisition multiples for German SME’s, it is now a good time for INDUS to expand its portfolio in our view.

Infrastructure shows a solid development in FY24 (10.2% EBIT margin in 9M, +1.9ppts yoy), which is expected to continue for FY25e. In addition, the Engineering segment should improve at least slightly next year. As communicated by management in the Q2 CC, product mix in H2’24e is much more favorable than in H1. Consequently, the operating margin in Q3 already improved considerably compared to H1’24 (9.0% vs. 5.2% in H1). In our view H2’24e should be a better reference point for FY25e than the muted H1.

On the other hand, Materials should be more challenging next year. While the medical companies show resilience, companies in the metal production and processing sectors are more affected by the current difficult macro environment. In addition, order backlog in Materials decreased over the last year, which puts further pressure on the top-line (€ 120m backlog in 9M’24 vs. € 153m end of FY23).

Strong Free Cashflows: INDUS continues to expect above € 110m in FCF this year (eNuW: € 115m), delivering a strong FCFY’24e of c. 10% (eNuW). Beyond that, a further reduction in working capital for FY25e looks plausible, which is however dependent on the sales development next year. This should support free cashflows in FY25e. Already in 9M, working capital decreased c. € 33m yoy to € 506m (vs. € 538m end of 9M’23; € 618m end of 9M’22), thanks to an ease of supply chains, muted sales growth and an active working capital management.

We continue to like the stock and confirm INDUS as one of NuWays’ Alpha Picks. Reiterate BUY with an unchanged PT of € 34, based in FCFY’24e.

You can download the research here: http://www.more-ir.de/d/31361.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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