GBC AG: Cenit AG | Rating: BUY

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 Report (Anno) Recommendation: BUY
Target price: 20.55 EUR
Target price on sight of: 31.12.2024
Last rating change:
Analyst: Cosmin Filker, Marcel Goldmann

Sales and earnings in line with expectations; “CENIT 2025” confirmed and further growth expected for 2024; Acquisitions to take place shortly  
With total annual sales of € 184.72 million (previous year: € 162.15 million), CENIT AG slightly exceeded both its own guidance (approx. € 180 million) and our previous estimates (€ 181.61 million). The company benefited in particular from the high level of M&A activity in recent financial years, which continued in the 2023 financial year with the acquisition of three new companies. The new companies contributed € 7.84 million to total sales for the first time, meaning that inorganic growth accounted for 4.8% of the total sales increase of 13.9%. However, organic growth of 9.1% also benefited from a base effect, as ISR, which was acquired in the 2022 financial year, was included for the full year for the first time in 2023.
 
As the new companies, particularly ISR with the highest sales, generate their sales primarily in the area of consulting and services, consulting sales rose particularly strongly by 33.5% to € 74.38 million (previous year: € 55.72 million). At the same time, sales of third-party software rose by 5.2% to € 92.70 million (previous year: € 88.14 million). By contrast, sales of own software fell slightly to € 16.79 million (previous year: € 17.71 million), which is mainly due to the ongoing transformation towards SaaS sales. At the end of the transformation, sales will be easier to plan, which is already the case at CENIT AG with a recurring sales share of 53.5%.
 
The strong increase in sales is also reflected in a significant improvement in EBIT to
€ 9.22 million (previous year: € 6.31 million). This would have been even higher, but was offset by M&A-related extraordinary expenses (€ 0.64 million) and increased PPA amortisation. In addition, personnel expenses rose sharply as a result of acquisitions, but also due to salary increases and inflation compensation payments. Despite the increase in EBIT, earnings after taxes were down on the previous year at € 4.50 million (previous year: € 6.28 million). This is primarily due to higher interest expenses. On the one hand, outstanding bank liabilities increased significantly in preparation for the inorganic growth. On the other hand, the financial result included write-downs on financial instruments.  
The Management Board of CENIT expects an increase in sales in the range of € 195 million to € 202 million for the current 2024 financial year and anticipates an improvement in the EBIT margin to 6.0% (previous year: 5.0%). At the same time, the 'CENIT 2025' plan was confirmed, according to which an increase in total sales to € 300 million and an increase in the EBIT margin to at least 8% is to be achieved by 2025. To this end, two to three acquisitions are to be made each year. Although the company is in advanced negotiations regarding an acquisition, we have not yet included this in our estimates. We therefore expect sales of € 200.42 million and EBIT of € 12.01 million for the current 2024 financial year. This growth should be achieved solely through the full-year inclusion of the companies acquired in 2023. We forecast sales growth of 8.0% in each of the following years and expect a gradual increase in the EBIT margin. However, due to the lack of inorganic growth in our planning, this is below the expectations of 'CENIT 2025'.
 
As part of our DCF valuation model, we have determined a target price of € 20.55 (previously: € 20.90). We continue to assign a BUY rating.  

You can download the research here:
http://www.more-ir.de/d/29379.pdf

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: https://www.gbc-ag.de/de/Offenlegung.htm +++++++++++++++
Date and time of completion of the study: 10.04.2024 (3:50 pm) Date and time of the first dissemination of the study: 11.04.2024 (9:30 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.