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AUSTRIACARD HOLDINGS | Growth story still on course; valuation gap remains

Healthy Q1’24 on tough comps, 2024e guidance underpins 2-digit growth story – Austriacard reported healthy Q1’24 results, growing adj. revenues 1.4% yoy (to €89.7m) and adj. EBITDA +2.2% yoy (to €13.7m) on tough comps. Although Q1 growth may look tepid, management provided a confident 2-digit growth outlook for the full year (revenues +10%, adj. EBITDA 10-12%) indicating back-loaded growth fueled by the phasing of recently signed contracts. The 2024 guidance effectively validates the 2-digit growth story articulated in our initiation report, with ACAG being well placed to benefit from structural drivers, including rising card penetration (mid-single-digit volume growth), accelerating card sophistication (e.g. dual-interface chip, contactless, biometric, metal) and the Greek digitization push.

Modest upgrade to our FY’24 forecasts; we expect 11% adj. EBITDA growth on card volume growth & digitization project execution – Following the FY’23 and Q1’24 results, we have recalibrated our model lifting our 2024 adj. EBITDA by 5%. This follows on from a 3% increase in our revenue forecasts (+10% yoy excl. IAS 29 effects), supported by strong order intake for card solutions, a greater digitization project pipeline, and inorganic growth from the acquisition of LSTech. We see momentum loaded particularly towards H2, given the majority of ACAG’s card provision contracts are scheduled for delivery in the 2nd semester. We project +11% growth in 2024e adj. EBITDA excl. IAS 29 effects, anticipating better pricing across card solutions thanks to higher utilization rates and positive mix effects from value-added cards.

Outer-year outlook intact; high-single-digit EBITDA CAGR through 2027e seems feasible – Looking further out, our forecasts pencil in c8% adj. revenue CAGR over 2025-27e, predicated on sustained cards industry volume growth, ACAG’s geographic diversification and increased market penetration in challenger banks. Across regions, we see mid-term growth driven by WEST as demand in the US and UK markets recovers, with CEE also increasing in relevance thanks to digital solutions inflows from Greece and Romania. On the profitability front, we expect cost efficiencies from utilization and improvements to the digital portfolio to deliver a >8% EBITDA CAGR over 2025-27e, at the high end among the broad peer group.

Valuation – ACAG shares have slipped c14% since the enlarged entity started trading in March 2023. The shares lost momentum particularly during summer 2023, as concerns about a “higher-for-longer” rates environment weighed on longer duration or tech-exposed stocks. Since then, ACAG has traded range-bound, with the stock coming under renewed pressure recently, slipping 8% ytd and remaining below the price of the recent placement (€6/share). As a result, the valuation is subdued at