Barco Kicking the can down the road

We updated our model after 1Q24 orders and sales declined more than we and CSS expected compared to a strong 1Q23, reflecting destocking by Barco's customers, mainly in Meeting Experience and Healthcare, and weaker demand in Entertainment markets.
We have incorporated into our model that Barco expects FY24 topline to be in line with FY23, with y/y growth resuming in 2H24 (recall that previously it was "with a gradual y/y increase from 2Q"). For FY25, Barco expects top-line growth on a full-year basis. Reassuringly, the FY24 EBITDA margin is expected to be above 14% (KBCSe 13.9%). Barco noted that it continues to invest in its innovation pipeline of breakthrough visualisation technologies in preparation for further new product launches in 2025. Barco also continues to strengthen its competitive cost position through its focused factory strategy, including the opening of the new Entertainment factory in China, which is expected to start commercial production in 2Q24.
New TP of € 18 (was € 19). Accumulate maintained.
Both 1Q24 order intake (€220.1m vs. €236.5m CSS) and sales (€195.9m vs. €213.3m CSS) were below our and CSS forecasts. Despite the lack of growth in 2Q24, Barco confirms its FY24 guidance, provided markets do not deteriorate further. 1Q24 was impacted by anticipated destocking by Barco's Meeting Experience and Healthcare customers. Barco expects this to be largely completed by mid-year. In Entertainment, demand was affected by the aftermath of the strikes in the North American film industry and customers delaying orders in anticipation of Barco's new product launches. Barco stressed that it has a broad funnel of new product launches in all its divisions, which should provide a solid foundation for a resumption of growth from 2H24.
A positive is the order book end 1Q24 reaching €524.8m, up 6% from the end of FY23 (but still down 1% y/y).
We lower our target price to €18 (was €19) as Barco has now indicated that there is ongoing uncertainty regarding macroeconomic and market conditions for FY24, which reduces its visibility. Barco expects a return to normalised customer inventory levels and stressed that it is on track with planned new product launches during the year.