Original-Research: Cenit AG (von GBC AG): BUY

Research | 3 November 2023 00:00

Original-Research: Cenit AG – from GBC AG

Classification of GBC AG to Cenit AG

Company Name: Cenit AG
ISIN: DE0005407100

Reason for the research: Research Comment
Recommendation: BUY
Target price: EUR 20.90
Target price on sight of: 31.12.2024
Last rating change:
Analyst: Cosmin Filker, Marcel Goldmann

9 months 2023: Three more companies acquired in 2023; High revenue and earnings growth achieved; Slight forecast and price target adjustment; Rating: BUY

In the third quarter of 2023, CENIT AG achieved sales growth of 9.3% to € 45.84 million (Q3 2022: € 41.95 million), thus seamlessly continuing the previous development of the current business year 2023. In the first two quarters, an increase in turnover of 22.7% (Q1) and 14.4% (Q2) was achieved. In total, sales revenues of € 133.31 million (previous year: € 115.86 million) were achieved in the first nine months, which corresponds to an increase of 15.1% compared to the previous year. A major growth driver was the continuation of inorganic growth, which was advanced in the current financial year by the acquisitions of mip Management Informations Partner GmbH, PI Informatik GmbH and ACTIVE BUSINESS CONSULT. ISR Informations Products AG was already acquired in the previous financial year 2022, which was only consolidated from 31 May 2022, so that there is also a base effect here. Overall, the inorganic contribution to growth is likely to have been around 14.00 million euros according to our calculations, which means organic growth in turnover of around 3.0%.

The strong sales growth of 9.3% was accompanied by a disproportionate increase in EBIT of 78.1% to € 4.60 million (previous year: € 2.58 million). Although the EBIT was positively influenced by a one-time gain of € 0.87 million from the sale of the subsidiary CENIT Japan K.K., the company would have achieved an EBIT increase of 44.6 % to € 3.73 million even without this effect. On the one hand, the higher EBIT margin of the acquired companies is likely to have had a positive effect. On the other hand, the Sirius cost-cutting programme that has been introduced is also likely to have made a positive contribution to earnings.

CENIT AG plans to continue the high M&A activity of the last quarters. In this context, the company has restructured its bank liabilities and taken out a new loan of € 40.00 million. With this loan, the existing loan of € 22.66 million was repaid. Since the acquisitions of the current financial year were financed from the operating cash flow, the borrowing less the dividend distribution (€ 4.18 million) and the repayment of leasing liabilities (€ 2.83 million) led to an increase in liquid funds to € 30.07 million (31.12.22: € 19.91 million). The company thus has sufficient financial leeway to opportunistically acquire further companies.

With the publication of the nine-month figures, CENIT’s management has
confirmed the forecast for the current business year. Sales of around € 180 million and an EBIT of around € 9.5 million are still expected. Based on the figures achieved in the first nine months, sales of around € 46.70 million and an EBIT of around € 4.90 million are expected for the fourth quarter. While turnover is expected to remain at about the same level as in the fourth quarter of the previous year, EBIT should improve significantly compared to the same period of the previous year.

An increase in EBIT in the fourth quarter should be primarily related to an expected rise in high-margin proprietary software sales. According to the company, there were postponements of orders, which could, however, still be realised in the current financial year. The affected order volume amounts to approximately € 1.5 million. In addition, the positive effect from the deconsolidation of the Japanese subsidiary should also make a slightly positive EBIT contribution in the fourth quarter. In addition, the savings effects from the Sirius programme should also increase earnings.

While we are keeping our revenue forecast unchanged, we are adjusting our EBIT estimate slightly to € 9.55 million (previously: € 9.80 million). However, we are taking into account the new loan of € 40 million in our estimates for the first time, which will lead to higher interest expenses. In particular, this leads to an adjustment of our estimated after-tax results for the financial years 2024 and 2025, while we leave both the revenue and earnings estimates for these estimation periods unchanged. Although the funds raised are to be used for the implementation of further M&A activities, we have not yet included them in our forecasts because they have yet to be realised. According to company information, an acquisition is very likely in 2023. In addition, there is currently an extensive M&A pipeline which, if fully realised, would increase turnover by around € 70 million.

Due to the slight adjustment of the EBIT for 2023 as well as the consideration of higher interest expenses in connection with the extensive borrowing, our price target determined within the framework of the DCF model is only slightly reduced to € 20.90 (previously: € 21.00). We continue to assign the BUY rating.

Die vollständige Analyse können Sie hier downloaden:
http://www.more-ir.de/d/28005.pdf

Kontakt für Rückfragen
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG und Art. 20 MAR Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,6a,7,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter:
http://www.gbc-ag.de/de/Offenlegung.htm
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Date (time) of completion: 03/11/23 (09:18 am)
Date (Time) first distribution: 03/11/23 (10:30 am)

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