W5 Solutions: Another soft quarter, but outlook is improving
Research Update
2024-07-24
07:45
Analyst Q&A
Closed
Hjalmar Ahlberg answered 0 questions.
Redeye updates on W5 following Q2-results which came in below our expectations. However, while recent quarters have been softer than expected, the outlook is gradually improving and we see potential for better performance in H2 2024 and 2025-26E.
HA
JW
Hjalmar Ahlberg
John Westborg
W5 reported weaker than expected Q2-results with net sales of SEK98m and EBITDA of -SEK0.2m while we expected SEK126m and SEK21.5m. The soft topline comes on the back of the low order intake seen in recent quarters while the company has continued to invest for future growth resulting in the unexpected negative result.
While Q2-results were weaker than expected, the company’s order intake improved sequentially and YoY and there is potential for further increase of the order intake in H2 2024. As such, we expect the balance between order intake and sales to improve which supports our expectations for increased growth in 2025-26E.
On the back of the weak Q2-results and lowered expectations for H2 2024, we have cut our 2024E EBITDA from SEK71m to SEK31m. Looking into 2025-26E we also lower our estimates but to a lesser extent with EBITDA being reduced by 8-12%. Our valuation range is also lowered where the new base case stands at SEK85 (SEK93) which implies an EV/EBITDA of 15x 2025E while the share currently trades at c10x 2025E EV/EBITDA.
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 176.0 | 387.0 | 411.7 | 524.9 | 629.9 |
| Revenue Growth | 23.9% | 120% | 6.4% | 27.5% | 20.0% |
| EBITDA | 24.4 | 56.0 | 31.4 | 82.3 | 104.4 |
| EBIT | 17.6 | 4.8 | -18.6 | 32.3 | 52.4 |
| EBIT Margin | 10.0% | 1.2% | -4.5% | 6.1% | 8.3% |
| Net Income | 13.7 | -1.3 | -24.2 | 24.2 | 39.3 |
| EV/Sales | 3.9 | 3.5 | 2.0 | 1.5 | 1.2 |
| EV/EBITDA | 28.1 | 24.2 | 26.4 | 9.8 | 7.3 |
| EV/EBIT | 39.1 | 283 | -44.7 | 25.0 | 14.6 |
W5 Solutions reported net sales of SEK98m and EBITDA of -SEK0.2m while we expected SEK126m and SEK21.5m, respectively. The soft topline comes on the back of the slow order intake seen in late 2023 and early 2024. Worth highlighting is that soft order intake is not related to loss of business but rather delays in potential new orders. Still, this has led to lower sales, and as the company has retained its staff and kept investing in future growth, it resulted in an unexpected negative result in Q2 2024. The Q2 earnings were also impacted by one-off costs of SEK2.5m in the quarter owing to provisions for restructuring costs related to the new business area structure that will be implemented in Q3 2024. On the positive side, the company saw a solid gross margin of 62% while we estimated 58%. The table below summarize Q2-results outcome compared to our forecast.
Disclosures and disclaimers