Formpipe: Poised to improve margins in '23e - ABG

Another quarter with poor margins...
...but recent slowdown in opex bodes well for '23e margins
21x '24e EV/EBIT, '21-'25e sales CAGR of 11%


Solid Q4, margins to improve in '23e

Formpipe's key Q4 results were pre-announced on 25 January. Sales were SEK 128m, up 5% y-o-y and 0% vs. ABGSCe. Both public SE (+9% y-o-y) and Private (+18% y-o-y) continued on their recent positive trajectories, while Public DK still saw some headwinds from tough comps (-12% y-o-y). In Private, we note that some banking customers remain hesitant in terms of investments, as suggested by Temenos' recent quarterly figures. Even so, Private ACV grew to SEK 6.5m (vs. SEK 5.5m in Q4'21), which underpins the segment's good momentum. We remain cautious for this figure in H1e, but expect improvements to prevail in H2e as Temenos has recently taken actions (e.g. change in management) to enhance its operations. As in recent quarters, margins (4.5% EBIT margin, vs. 13.1% in Q4'21) suffered from elevated opex levels. However, opex growth has recently decelerated (15% y-o-y, vs. 23% in Q3), and we expect this trend to continue throughout 2023e on the back of: 1) less FX headwinds, 2) lower personnel turnover, and 3) lower growth investments.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/formpipe/Equity-research/2023/2/formpipe---poised-to-improve-margins-in-23e/