Comarch - Strong 2020 Q4 Results, Attractive Multiples
Comarch smashed expectations with its 2020 fourth-quarter results, with an over-41% EBITDA boost to make to a record-high FY2020 full-year total of PLN 272m. Overall Comarch had a very strong year in 2020 despite the pandemic, with sales up by 7% from the previous year and a strong sales margin of 29.5%. With tight cost management, reflected in restrained hiring, combined with savings facilitated by remote working, the Company also generated healthy cash flow for the year. When it comes to prospects for FY2021, since not much is known about Comarch’s order backlog at the moment except that it is “several percent” higher than last year, we are prompted to adopt a conservative approach to our earnings predictions; we assume that revenue in 2021 will register a modest, 4% rise, accompanied by a lower sales margin of 28.2% after a year-over-year decrease of 1.3pp to a level equivalent to the average margin recorded in the last five years. Our prudent assumptions leave room for positive surprises, in particular in the segment of TMT Solutions, where we are currently expecting flat revenue growth in 2021 after an over-10% fall in 2020. We see EBITDA in 2021 as reaching PLN 252m. On our updated estimates CMR stock is currently trading at 6.2x 2021E EV/EBITDA and 16.1x P/E, values that show huge undeserved discounts of 46% and 13%, respectively, to the corresponding peer multiples. We maintain a buy rating for CMR, with the price target raised to PLN 267.00 per share.
Comarch is a producer of IT systems for key sectors of the economy: telecommunications, finances, public administration, large companies and the sector of small and medium-sized companies. A range of Co.'s product offering includes ERP-class and financial and accounting systems, CRM systems and loyalty software, sales support and electronic document exchange systems, knowledge management, Business Intelligence, security and protection of data and many other solutions. Apart from providing IT solutions to its customers, Co. is focused on professional customer service and on providing consulting, advisory and integration services as a uniform package.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
Clients get access to a comprehensive selection of research products including daily market insights, monthly roundups, macroeconomic views, industry- and company- specific analyses, investing strategies, earnings comments, etc.
We give our institutional clients numerous opportunities to connect with industry professionals, top executives, and leading analysts:
- Get direct access to senior management teams at listed companies (over 30 meetings in 2018),
- Engage in our many industry events, featuring listed Polish and global firms (in 2018, we hosted sector-themed conferences around industrials, chemical companies, telecoms, retail, and financials, and co-hosted a Best of Poland investors' with Commerzbank and the Warsaw Stock Exchange),
- Stay informed through an array of enlightening discussion panels, workshops, and briefing sessions with regulatory officials.
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