Original-Research: 123fahrschule SE (von NuWays AG): Buy

Classification of NuWays AG to 123fahrschule SE

Company Name:	123fahrschule SE
ISIN:	DE000A2P4HL9
Reason for the research:	Update
Recommendation:	Buy
from:	07.11.2024
Target price:	EUR 7.20
Target price on sight of:	12 months
Last rating change:
Analyst:	Philipp Sennewald

Improved profitability and strong CFO in Q3

123f published a strong set of preliminary Q3 results, showing continuous top-line growth as well as improved profitability. Q3 preliminary sales increased by 11% to € 5.7m (eNuW: € 5.6m), which should have been predominantly driven by the Private Customer segment (eNuW: € 4.5m). Moreover, the Driving Instructor Training segment should have continued to grow strongly to € 0.7m (eNuW: +50% yoy). On the other hand, the Professional Driver Education segment is seen to have declined again in Q3 (eNuW: € 0.5m; -18% yoy).

Against this backdrop, Q3 adj. EBITDA significantly increased yoy to € 0.2m (flat in Q3 ’23), clearly demonstrating efficiency gains as well as operating leverage. Mind you, 123f imposed some accounting changes in the beginning of the year concerning build up of provisions, which is now made throughout the year instead of only once in December. Unadjusted EBITDA came in at € 0.1m.

The clear highlight of the release, however, was the improved operating cash flow, which came in at € 0.6m, showing a further sequential improvement compared to the first two quarters (H1 CFO: € 0.9m). With a CFO in 9M ’24 of € 1.5m, 123f already achieved 4x the amount of the entire FY ’23 (€ 0.4m). Yet, FCF should still have been slightly negative following the ongoing investments into the company’s proprietary software solutions.

Strategy 2027. In early November, management passed the new Strategy 2027 in reaction to the announced legislative changes, which are likely coming into effect in Q1 2026. Next to the obvious scale advantages of the return of online theory, 123f is going to focus on the practical training, which is going to receive a “digitalization boost” going forward driven by the comprehensive roll-out and further software development of the “digital driving instructor” in the simulator. According to CEO Polenske, this will enable 123f to reduce the price of a driver’s license by up to € 1,000, which should translate into massive market share gains in the company’s target regions. Thanks to the higher margin digital solutions and an expected reduction in vehicles and instructors, this should further allow for improving profitability.

Regarding the necessary financing of these projects as well as the roll-out of simulators, management is currently considering raising further capital, i.e. in the way of a convertible with a volume of € 4-5m.

Reiterate BUY with an unchanged PT of € 7.20 based on DCF.

You can download the research here: http://www.more-ir.de/d/31213.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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