Original-Research: Vectron Systems AG (von GBC AG): BUY

Original-Research: Vectron Systems AG - from GBC AG

Classification of GBC AG to Vectron Systems AG

Company Name: Vectron Systems AG
ISIN: DE000A0KEXC7

Reason for the research: Research Comment Recommendation: BUY
Target price: 10.00 EUR
Target price on sight of: 31.12.2024
Last rating change:
Analyst: Cosmin Filker, Matthias Greiffenberger

Preliminary figures for 2023: Sales and earnings development in line with expectations, rating: BUY
 
Vectron Systems AG (Vectron for short) published its preliminary figures for the past fiscal year 2023 on 21 February 2024. With sales revenue of € 37.4 million (previous year: € 25.2 million), the company not only significantly exceeded the previous year's figure by 48%, but also returned to its growth path as expected. This figure was in the upper half of the sales guidance, which forecast sales in a range of € 36.0 million to € 37.8 million. Our forecast (GBC estimate: € 38.6 million) was also almost achieved.
 
According to our calculations, Vectron sales increased by 11% to € 28.0 million (previous year: € 25.2 million). The main reason for the sales growth in the Vectron division (POS systems and digital services) was the further increase in recurring income by 53% to € 13.2 million (previous year: € 8.6 million), which now accounts for 47% (previous year: 34%) of total sales in this division. This clearly reflects the company's focus on expanding its digital business in particular. Accordingly, Vectron has outsourced hardware production to external partners. The sales of acardo group AG (acardo), which was acquired on 1 January 2023, also contributed to the overall increase in sales. According to our findings, the inorganic contribution to sales is likely to have exceeded €10 million.  
Thanks to the expansion of the digital business and the earnings contribution of the acquired acardo, the turnaround was achieved with EBITDA of € 3.0 million (previous year: € -3.9 million). At the same time, the preliminary EBITDA was at the upper end of the guidance raised in October, which had forecast EBITDA in a range of € 2.2 million to € 3.2 million. Our EBITDA estimate (GBC forecast: € 3.2 million) was also almost achieved. EBITDA should be characterised by extraordinary income from the reversal of provisions.
 
Even if this is a one-off effect, a disproportionately high improvement in earnings should still be achieved in the current financial year 2024. On the one hand, the expansion of the digital business will be accompanied by higher margins. On the other hand, the cost-cutting measures introduced in the hardware area are not expected to take full effect until 2024. The expansion of the digital business and thus of recurring sales will also make the company less dependent on external fluctuations in demand. Vectron has not yet felt any negative effects from the VAT increase for the catering industry. On the contrary, digital services are likely to be in greater demand against the backdrop of staff shortages in the sector.  
The acquisition of acardo should also make a significant contribution to sales and earnings in the current 2024 financial year. The couponing specialist announced the expansion of its couponing network by a further 3,500 stores at the beginning of the year, making it the largest check-out couponing network in Germany. Against this backdrop, Vectron's guidance should remain valid and we are maintaining our estimates for the financial years 2024 and 2025.
 
As part of the DCF valuation model, we have determined a target price of € 10.00 (previously: € 10.10). The marginal reduction in the target price is due to the increase in the risk-free interest rate and thus the weighted cost of capital. On the other hand, we have raised the perpetual growth rate by 0.5% due to inflation, which has had the effect of increasing the price target. We continue to assign the BUY rating.  

You can download the research here:
http://www.more-ir.de/d/28977.pdf

Contact for questions
GBC AG
Halderstraße 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Date (time) completion: 26.02.24 (10:15 am) Date (time) first transmission: 26.02.24 (11:30 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.