Original-Research: Cenit AG (von GBC AG): BUY

Original-Research: Cenit AG - from GBC AG

Classification of GBC AG to Cenit AG

Company Name: Cenit AG
ISIN: DE0005407100

Reason for the research: Research Comment Recommendation: BUY
Target price: 20.55 EUR
Target price on sight of: 31.12.2024
Last rating change:
Analyst: Cosmin Filker, Marcel Goldmann

Q1 2024: Strong start to the current financial year; forecast confirmed; price target and rating confirmed
 
CENIT AG has made a good start to the current fiscal year. With sales of € 50.55 million (previous year: € 43.42 million), the previous year's figure was significantly exceeded by 16.4%. Even though inorganic effects contributed to this increase, we assume that a significant part of the sales growth is also of organic origin. The companies acquired in the past financial year 2023 (mip, PI, ABC and CCE) were not yet or only partially included in the first quarter of the previous year. According to our calculations, the inorganic effect should amount to around € 4.0 million. Adjusted, CENIT AG thus achieved organic sales growth of € 3.13 million or 7.2%. For the second time in a row, a new sales record was achieved on the basis of the first quarter.
 
Based on the significant increase in sales, CENIT AG also reported a significant improvement in EBIT to € 0.69 million (previous year: € 0.01 million), which corresponds to an EBIT margin of 2.4% (previous year: 0.0%). CENIT AG generated earnings after taxes of € 0.03 million (previous year: € -0.07 million) despite a significant increase in financial expenses.
 
Particularly noteworthy is the strong increase in operating cash flow to € 12.54 million (previous year: € 8.69 million), which contributed to an increase in total cash flow to € 9.32 million (previous year: € 4.72 million). In addition to the increase in operating earnings, the operating cash flow benefited from a significant decrease in working capital, primarily due to a sharp rise in contract liabilities. This includes payments received for services still to be rendered in the course of the financial year. Cash flow should therefore 'normalise' again over the course of the year.
 
As expected, CENIT's management has confirmed its guidance with the publication of the Q1 figures. Sales of € 195 to € 202 million and EBIT of € 11.7 to € 12.2 million are still expected. In terms of sales, the first quarter is fully in line with the guidance with sales of € 50.55 million. However, the generally higher contribution to sales in the second half of the year must be taken into account here, meaning that the confirmed guidance can be categorised as conservative. The distribution of earnings also follows the seasonal distribution of sales, meaning that EBIT is expected to rise in the following quarters, particularly towards the end of the year. In this respect, Q1 EBIT is still of little significance for the development of the year as a whole.
 
In view of the fact that Q1 was in line with expectations and the confirmed guidance, we are sticking to our forecasts. As before, our estimates do not include any inorganic effects, which nevertheless remain an integral part of our corporate planning. In order to achieve the 'CENIT 2025' plan, we anticipate two to three acquisitions per year, which should contribute around € 40 to € 50 million to sales. By the beginning of 2025, the annual sales level should thus be increased to between € 240 million and € 250 million. The company has cash and cash equivalents totalling € 33.62 million and therefore sufficient financial scope to implement its inorganic growth strategy.
 
In light of our unchanged forecasts and the unchanged valuation model, we are leaving our price target unchanged at € 20.55. The rating remains BUY.  

You can download the research here:
http://www.more-ir.de/d/29751.pdf

Disclosure of potential conflicts of interest pursuant to Section 85 WpHG and Art. 20 MAR The company analysed above has the following potential conflict of interest: (5a,6a,7,11); A catalogue of potential conflicts of interest can be found at: https://www.gbc-ag.de/de/Offenlegung.htm +++++++++++++++
Date and time of completion of the study: 15/05/24 (12:24 pm) Date and time of the first dissemination of the study: 15/05/24 (2:00 pm)

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The issuer is solely responsible for the content of this research. The result of this research does not constitute investment advice or an invitation to conclude certain stock exchange transactions.