BTS Group: Guiding for a record Q4 despite a tough market - ABG

Weak North America behind Q3 miss, Q4 EBITA guided +25% y-o-y
With 5% less employees vs year-end, visibility remains low
We cut EBITA by 3-7%, share trades at 13.0x 2023e EV/EBITA


Focus on the FY guidance

BTS delivered a weak Q3 report missing our expectations on sales in North America and Europe, and EBITA in North America, Europe and Other markets, putting EBITA -36% vs us and -19% y-o-y. North America dropped an estimated -11% organically in Q3, on an easy comp from last year. Longer sales cycles and hesitant customer segments caused the weaker result, while stronger areas where for example Pharma and Finance in the US as well as Southeast Asia, according to the company. However, despite the quarterly miss, BTS decided to keep its FY guidance of "earnings in line with 2022", which at first sight looks a bit optimistic as YTD EBITA is down -12% y-o-y. Our understanding of the guidance is that it does not imply a much better market in Q4, but rather better results from cost initiatives made during the year (Q3 employees -5% vs year-end 2022 for example), to yield a higher margin. This, combined with the fact that the guidance is released halfway into Q4, de-risks it a bit in our view. We now estimate a 2023e EBITA of SEK 339m, -3% vs 2022 for a 16% y-o-y growth in Q4e.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/bts-group/Equity-research/2023/11/bts-group---guiding-for-a-record-q4-despite-a-tough-market/