S&T confirmed at HOLD, TP EUR 22 - Short-term uncertainty on top, margin strength underneath
As an IT service and technology provider, S&T should be able to weather the current storm better than other industries. S&T has a strong order book, a 26% share of recurring IT operations revenues, an about 20% share of revenues with public institutions and through its medical business exposure to the exploding manufacturing of respiratory machines. However, as the 2008/2009 financial crisis and recently downgraded IDC sector growth estimates (-2.7% yoy spending forecast) show, the industry should not be fully weather-proof, and S&T is also manufacturing products for the avionics and automotive industries. Still, management is confident about its mid-term EUR 2 bn revenue and 12% EBITDA profitability target and recent 2019 results have already shown strong improvements in margins. This is why we increase our price target to EUR 22 (from EUR 20) but confirm our HOLD recommendation for lack of upside following the recent rally and economic uncertainties ahead.S&T AG is an Austria-based supplier of information technology (IT) solutions, specializing in Industry 4.0, embedded computer systems and Internet of Things (IoT) technology. The Company operates through three segments: IT Services, which handles the end-to-end realization of IT projects, from planning (consulting), through implementation (integration) to long-term operation (outsourcing); IoT Solutions, which focuses on the development of IoT and Industry 4.0 solutions combining hardware, middleware and services marketed to the industrial automation, medical technologies, infotainment and smart energy sectors, and Embedded Systems, which provides hardware featuring embedded technologies used by the transport, aviation and communication sectors. The Company is a full-service-provider of IT services in Central and Eastern Europe. Its core markets are Germany, Austria, Switzerland, Eastern Europe and North America.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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