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

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 € 70m for M&A
in FY24e, due to the large cash position of € 266m at the end of FY23,
driven by a strong FCF of € 199m in FY23. As of yet, INDUS has spent
approx. € 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 € 6.1m (Q1 FY23: € 7.5m) adjusted for the € 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: €
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 € 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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