Kapsch TrafficCom re-initiated at HOLD, TP EUR 14.50 - A difficult year ahead
Following a transfer of coverage, we re-initiate Kapsch TrafficCom with a HOLD recommendation and a target price of EUR 14.5. Due to the loss of contracts and expiry of projects, the group ran into a margin squeeze as cost overruns and hiring in growth markets collided with top-line-led overcapacities in other markets. In the aftermath of very lacklustre 1Q results, we expect the company to provide details of its recently initiated cost reduction and efficiency improvement programme and to present a streamlined mid-term outlook. At the same time, we could still see writedowns and impairments similar to adjustments made last year, which may ultimately lead to a new FY guidance, including potentially a short-term dividend policy. With the scope of the house-cleaning and strategy adjustments only to be presented later this year, we keep our forecast low, which also feeds into our target price.Kapsch TrafficCom is an international supplier of superior intelligent transportation systems (ITS). Co. subdivided into the following three segments: Road Solution Projects; Services, System Extensions, Components Sales; and Others. The segment Road Solution Projects relates to the installation of ITS solutions. The segment Services, System Extensions, Components Sales relates to the sale of services and components in the area of ITS solutions. The segment Others relates to non-core business activities conducted by Kapsch Components KG. In this segment, Co. offers engineering solutions, electronic manufacturing and logistics services to affiliated entities and third parties.
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