BTS Group: Market resiliency and guidance in focus - ABG

Q2e: -2% organic growth, EBITA SEK 94m (-16% y-o-y)
Keeping FY guidance should be supportive for estimates
FX-driven est. changes, share at 13.0x 2023e EV/EBITA

Market resiliency in focus
BTS has seen weakness in the US tech market in the last 3-4 quarters, while the rest of the US and the World have kept up well, in our view. However, we expect that BTS will be affected by a weaker global economy and more cautious corporate spending on management consulting services. Even though it is not a perfect read-across, we note that the Nordic IT services market has shown a clear deceleration in Q2, and we believe there are similar drivers between these firms and BTS. We keep our underlying estimates but update for a stronger USD and EUR since the Q1 report, and find ourselves raising sales by 2-5% and EBIT by 3-5%. The company has a net cash position, and we therefore do not expect any negative surprises on the net financials. For Q2 specifically, we estimate -2% organic growth (2% in Q1) and EBITA of SEK 94m (-16% y-o-y) on what are still relatively tough comps (21% organic growth in Q2'22).

Guidance important for H2e
In Q1, BTS maintained the guidance that '23 EBITA is expected to be higher than 2022, which in our view was a slight downgrade, as it added the acquisition of The Boda Group (added 3% to sales). We are currently at 6% EBITA growth in 2023, which we believe is slightly below the current guidance. So if the guidance is reiterated, there should be estimate support for H2. in our view.

Trades at 13.0x 2023e EV/EBITA
The share is down -7% YTD and -21% in one year, which we think is due to increased concern of an economic downturn and a cut in management consultancy spending. BTS has historically been affected by global GDP movements, and we therefore expect the near-term to show lower growth than the target level and the historical average, but it has also managed to come out of weakness in a strong manner almost every time. The share is currently trading at 13.0x '23e....

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