Addnode: Handling Softer Markets Well

Research Update

2024-10-28

06:50

Redeye retains its Base Case following a solid Q3 report, slightly beating our forecasts on EBITA. While several areas face soft markets, a high share of recurring revenue and a diversified revenue base in regions and sectors help Addnode perform solidly.

Fredrik Nilsson

Anton Hoof

Solid Quarter with Stronger than Expected Margins in All Divisions

Group-level sales was SEK1,859m relative to our SEK1,840m forecast. Sales increased by 3% y/y (which is not a relevant metric considering the change in Autodesk’s transaction model – margins are neither). Like for like, management believes the underlying organic sales growth was 16% y/y. EBITA was SEK200m, corresponding to an EBITA margin of 10.8% (7.3). Our forecast was SEK185m and 10.0%, and the beat was due to slightly higher margins in all Divisions. EBITDA – CAPEX was SEK186m (80), corresponding to an EBITDA – CAPEX margin of 10.0% (6.6).

Stable Performance in Softer Markets

Several of Addnode’s end markets are currently hurt by low demand. However, thanks to a high share of recurring revenue and a diversified revenue base in regions and sectors, Addnode grew with healthy profitability at the group level. This is especially true within the PLM Division – although its margins fell y/y and the organic growth was slightly negative – which has shown great resilience to the soft automotive market, which is important to the Division. PM has a similar story with solid performance despite a softer public sector.

Base Case Unchanged at SEK112 (112)

We leave our Base Case at SEK 112 (112) following minor estimate revisions. Addnode’s valuation of 23x EBIT for 2025e is below the average and in line with the median SaaS business in our peer list. Its EBITDA-CAPEX multiple of 19x 2025e is somewhat more attractive. All in all, we believe it is a reasonable valuation of a high-quality VAR/SaaS business.

Key financials

SEKm20232024e2025e2026e2027e
Revenues7,412.08,094.76,626.67,487.18,425.2
Revenue Growth19.1%9.2%-18.1%13.0%12.5%
EBIT410.0587.9720.9855.0959.6
EBIT Margin5.5%7.3%10.9%11.4%11.4%
EV/Revenue1.62.02.52.21.9
EV/EBIT29.827.522.519.016.9
EBITDA - CAPEX55274487210111115
EBITDA - CAPEX Margin7.4%9.2%13.2%13.5%13.2%
EV/EBITDA - CAPEX22.121.718.616.014.6
Net Debt8371295138213641360
NWC/R12mSales-7.3%-7.0%-7.0%-7.0%-7.0%

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