Proact: Q2 beat and M&A drive positive revisions - ABG

21% organic growth in Q2 drove a 21% adj. EBITA beat System sales was the main driver, adj. EBITA up 6-7% 8.0x 2023e EV/adj. EBITA for a 16-17% discount to peers Sales and margin beat in Q2

Proact delivered a strong Q2 report, beating our sales and adj. EBITA estimates by 6% and 21%, respectively. The sales beat was driven by an organic growth beat (21% vs ABGSCe at 15%) and it was explained by system sales, something that usually comes with a somewhat lower margin and has a lumpy nature with a few larger orders this quarter. Despite that, Proact managed to deliver a 7.1% adj. EBITA margin in Q2, the highest Q2 margin in more than 15 years, taking the R12m clearly towards the target of reaching an 8% margin. Even though services sales fell short of our expectation by -2%, the important organic growth in cloud revenues of 9% was slightly ahead of our 8% expectation. This means that the miss in services comes from non-cloud revenues, i.e. consulting revenues, which is more lumpy and lower quality than cloud in our view. All in all, Proact delivered a strong Q2 report.

Positive estimate revisions We are a bit careful to fully extrapolate the system sales beat and also the better than normal margin in system sales, as it is a lumpy business and usually sees lower margins when volumes increase, which was not the case this quarter. However, on the back of the sales and margin beat as well as including the recent acquisition of sepago, we raise sales and adj. EBITA estimates by 3-4% and 5-7%, respectively. We expect positive organic growth in the quarters ahead as Proact continues to face easy comps in both Q3e and Q4e.

Share remains at a discount to IT-reseller peers IT-reseller peers have had a tough development in the market, with for example Dustin (-45%) and ATEA (-33% YTD) being down significantly. Proact shares have kept up well this year, +1% YTD, but with positive estimate revisions and a historical discount to peers, we still see the shares trading at a 16-17% discount t ... Läs mer på ABG Sundal Collier

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