Original-Research: INDUS Holding AG (von NuWays AG): Kaufen

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Original-Research: INDUS Holding AG - from NuWays AG

Classification of NuWays AG to INDUS Holding AG

Company Name: INDUS Holding AG

ISIN: DE0006200108

Reason for the research: Update

Recommendation: Kaufen

from: 05.06.2024

Target price: EUR 36.00

Last rating change:

Analyst: Christian Sandherr

RS feedback: Well-filled M&A pipeline to support further growth

Topic: On Monday, we hosted a digital roundtable with INDUS. Here are our

key takeaways:

Well-filled M&A pipeline: INDUS has a substantial budget of EUR 70m for M&A

in FY24e, due to the large cash position of EUR 266m at the end of FY23,

driven by a strong FCF of EUR 199m in FY23. As of yet, INDUS has spent

approx. EUR 20m and the pipeline for growth as well as add-on acquisitions

remains filled. Industries of particular interest for INDUS are automation

technologies within the Engineering segment, recycling within Materials and

sustainable infrastructure. In our view, now is a good time for value

accretive acquisitions in the German Mittelstand, as valuation multiples in

recent years have come down.

Operationally, Infrastructure should compensate for a weaker Materials and

Engineering Segment in FY24e: Sales in Engineering declined 8.9% yoy in Q1

due to the slowdown particularly in the sorting systems and packaging

technology segment. Incoming orders for the entire industry were 10% below

the previous year's level in real terms, however, a recovery is expected

for the second half of FY24e. Materials in Q1 was affected by declining

volumes and massive price pressure from customers (-11% in sales yoy).

While in Q1 & Q2 FY23 the Materials segment benefited from lower cost of

materials (12% EBIT margin in Q1 FY23, +3.1pp yoy), now these cost

reductions are passed through to customers, leading to pressure on the

top-line and more normalized levels of profitability.

In contrast, we expect to see an increase in EBIT for Infrastructure in

FY24e. The business climate in the construction industry is slightly

improving and raw material prices such as steel and timber are falling.

Furthermore, the portfolio company Aurora, a specialist in heating and

air-conditioning systems (c. 14%

of segment sales), recently realized a substantial improvement in operating

efficiency.

Solid FCF expected for FY24e: Due to a lower seasonal working capital

increase in the first quarter, free cash flow in Q1 improved significantly

to EUR 6.1m (Q1 FY23: EUR 7.5m) adjusted for the EUR 14.4m onetime cash inflow

from a property sale in Q1 2023. However, we also expect the seasonal

working capital reduction in the second half of the year to be lower than

usual. FCF should come in again in the low triple-digit area (eNuW: EUR

104m). Importantly, at the current valuation INDUS provides an attractive

adjusted FCF yield of c. 10% (eNuW).

INDUS remains a BUY with an unchanged PT of EUR 36, based on FCFY 2024e.

You can download the research here:

http://www.more-ir.de/d/29975.pdf

For additional information visit our website

www.nuways-ag.com/research.

Contact for questions

NuWays AG - Equity Research

Web: www.nuways-ag.com

Email: research@nuways-ag.com

LinkedIn: https://www.linkedin.com/company/nuwaysag

Adresse: Mittelweg 16-17, 20148 Hamburg, Germany

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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.

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The result of this research does not constitute investment advice

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