Alfen Bridging the 1Q23 results gap with the CMD outlook

Last week, Alfen reported its 1Q23 results that conflicted with its positive mid-term outlook at the CMD a week before. The 1Q23 EV charging division hit a speed bump with a 32% yoy unit sales decline. With hindsight, the recent share price volatility might have been reduced if both updates came at the same time. In this note, we attempt to bridge the gap between the 1Q23 disappointment and the FY25-27 positive outlook on growth and margins. The company believes that the EV-charging segment will only resume its growth trajectory over 2H23 as wholesale channel destocking eases. The energy-storage segment picked up part of the slack, but realises significant lower gross margins. Hence, the impact on gross margin was mainly caused by a mix effect as margins by segment came close to our estimates. But Alfen also invested in new capacity over 1Q23 which added more pressure on the EBITDA margin. The 1Q23 EBITDA margin amounted only to 11.2%, below the 15-20% mid-term guidance from the CMD. The revenue outlook FY23 of 540-600m was maintained, mainly based on 165m backlog for storage.

While the energy transition investments to avoid climate change are crystal clear, we believe that the growth inflection point for Alfen will come only in FY25 or beyond. We published a note this week that describes the Road/Race to Net Zero. The energy sector is responsible for around three-quarters of greenhouse gas emissions today and holds the key to averting the worst effects of climate change.

Changes to our estimates overview:
We increased our sales expectations on the 165m backlog in Storage that compensates the slower growth in EV-charging, but lowered margin expectations.

Investment Case: Alfen is extremely well financed and is expected to emerge as a market leader in this space. We maintain our Accumulate and EUR 83.0 target price based on our DCF-calculation. We Initiated recently with the 83.0, but had have built in room for non-linear growth reports like the 1Q23 results. A tough period for the EV-charging segment will hit start-ups and loss making competitors harder.