S&T confirmed at HOLD, TP EUR 26 - More deals to fuel growth
We confirm our HOLD recommendation for S&T but lift our price target to EUR 26 (EUR 22) following recent acquisitions and plans to speed up new deals in 2020e and 2021e. S&T has shown quite some resilience to the economic effects of the pandemic, with revenues up in 2Q 20, also thanks to acquisitions and reporting a strong 10% EBITDA margin. This was fuelled by robust demand in the IoT Solutions | Europe segment, in particular for medical equipment and by government authorities, and supported by short-time work on the cost side. Also, S&T announced two acquisitions in early July (closing in autumn/4Q 20), which are expected to add EUR 140 mn in revenues next year. At the 2Q results release management confirmed accelerating M&A due to favourable conditions and ramped up the target revenue goal for the short term. Although not included in our earnings forecast, we add another EUR 150 mn in bolt-on revenues at average profitability (10% EBITDA margin) and multiples to our valuation, raising the price target to EUR 26 overall.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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