Proact - Strong Q4 and solid start to 2023 - ABG

Momentum looks solid
Proact delivered an impressive Q4 report, growing sales 40% organically y-o-y, and we are encouraged by the breadth of the growth. For example, the company grew both its system and services sales organically in all four regions (Nordics, UK, West and Central). We see catch up in demand post-pandemic, as well as an improved supply chain that helps Proact to deliver systems at a higher pace. The order backlog was strong and sales were negatively affected a year ago from component shortages. Given the continued positive momentum on orders and outlook for 2023, we are more optimistic about H1'23e organic growth, although we estimate negative organic growth in H2'23e due to tough comps and a somewhat slower market. With a net cash position year-end 2023e, there is ample financial headroom to continue to do bolt-on acquisitions, driving revisions and earnings upwards.

Adj. EBITA up 3-4%
We raise our H1'23e organic growth estimates somewhat, but are more cautious on H2'23e given Proact's lumpiness in the system business as well as the tough comparable growth rates it will face. On a FY 2023 basis, we estimate 0% organic growth and an adj. EBITA that declines -1% on the basis that it increased 52% in 2022. All in all, we raise our 2023-24e adj. EBITA estimates by 3-4% post the strong Q4 report.

On the way to its margin target
Proact targets an 8% EBITA margin, vs 6.6% in 2022 and our estimate of 6.9% in 2025e, and we think this is possible over some years as the mix services/system sales needs to improve, both organically but also through M&A. The company reduced its ROCE target in the report, from 25% to 20%, which we find relatively neutral as we already forecasted a ROCE below 20%. On our updated estimates the share trades at 8.8x EV/EBITA 2023e, which is 25% below IT reseller peers.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/proact/Equity-research/2023/2/proact---strong-q4-and-solid-start-to-2023/