Barco We took ‘One Look' at Barco an decided to lower the barrier

In 1H24, Barco's business was impacted by customer destocking in the Meeting Experience and Healthcare segments. In Entertainment, customers delayed investments as a result of a weak film slate and in anticipation of Barco's upcoming product launches.
While visibility remains low, Barco has reason to look forward to a very different 2H24. But we now think it will be even more back-end loaded and somewhat milder than we originally expected.
We maintain our positive stance - albeit with a slightly lower Target Price of €15.8 (average of our DCF and SOTP) - as Barco continues to invest in its innovation pipeline in preparation for further product launches in FY25 and beyond.
On a positive note, customer inventory levels are returning to normalised levels and market conditions are improving in Entertainment.
Today, "Transformers One" is the first Hollywood studio title to be shown in Barco HDR in 5 theatres in the USA. This will be followed by "Wild Robot" on 27 September and 5 more titles. Recall HDR (High Dynamic Range) is Barco's next-generation cinema technology that artfully directs light to unleash the full potential of every film with darker darks, brighter lights and a full spectrum of vibrant, true-to-life colours.
We welcome the fact that Barco is on track to launch numerous new products across all divisions, which should contribute to both top-line and profitability, although we have incorporated in our updated model that the impact will mostly be felt in 4Q24 and accelerate into FY25.
Our updated model takes into account Barco's ambition to improve its competitive cost position with the roll-out of its focused factory strategy, including the newly opened entertainment factory in China.
Our model remains in line with Barco's ambition for 1H24 results, 2H24 y/y top-line growth and full-year top-line growth from FY25 onwards.
As Barco stated that the FY24E EBITDA margin is dependent on the top line and product mix, we have lowered our FY24E EBITDA margin from 12.3% to 11.9%, still assuming a strong recovery in 2H24E (KBCSe 14.9% vs. 8.1% in 1H24) and in the range of Barco's FY24E EBITDA guidance of 11-13%.
We have a DCF valuation of €16.0 and a SOTP valuation of €15.6, resulting in a new Target Price of €15.8 (previously €18.0).
At our new Target Price of €15.8, Barco trades at a 2024E P/E of 24.1, an EV/sales of 1.2 and an EV/EBITDA of 10.3. By 2027E, these multiples would be 13.5, 1.0 and 6.9 respectively.