Solwers: M&A-driven growth but weak profitability in Q3 - Nordea

Solwers posted Q3 2024 revenue growth of 21% y/y, entirely driven by acquisitions. Q3 EBIT was EUR 0.5m, down from EUR 0.9m a year ago. The decline was due to client caution in advancing projects, intense price competition and a somewhat lower billing rate y/y. However, Solwers' order backlog reached its peak for the year in the quarter, and the company sees the market improving, driven, for example, by lower interest rates. After the Q3 report, we decrease our top-line estimates for 2024-26 by 2-3%, and cut our adjusted EBIT estimates by 12-18%. Consequently, our DCF- and peer-based fair value range is cut to EUR 4.3-5.1 (4.8-5.7), which includes EUR 0.7 per share in present value of unannounced acquisitions. We believe Solwers will continue with its M&A-driven strategy and we foresee further margin improvement potential once the market recovers. - Marketing material commissioned by Solwers.

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