Sirma Group Holding: ambitious agenda, fair valuation (stays HOLD)

We keep our HOLD rating on Sirma Group Holding (Sirma), but hike our 12M price target (PT) from BGN 0.45/share to BGN 0.84/share (2% upside potential). The solid 1Q22 EBITDA (+19% yoy), supported by the acquisition of Sciant in December 2021 (2021 net profit of c.BGN 1m vs. BGN 4.5m for Sirma Group), should allow for deleveraging (on our numbers, the net debt/EBITDA drops from 1.8x in 2021 to 0.7x at end-2024E). Hence, we expect the company to start distributing regular dividends: we pencil in BGN 0.02/share to be paid out in 2022E, rising to BGN 0.05/share in 2024E (3-6% dividend yields, respectively). Moreover, we note that, at the AGM today (24 June), the shareholders will decide on potential disposal of Sirma AI (a member of the Sirma Group). If the deal is approved, the shareholders will receive a c.EUR 19.5m cash payment (83% of Sirma’s current market cap). We also stress that Sirma is targeting to reach a BGN 160m top line in 2026E, on the back of a combination of organic growth, M&A and synergies (we forecast BGN 98m, but we do not include any acquisitions in our model, given the lack of details). However, Sirma’s current valuation is not low enough to command a BUY rating, in our view. Sirma is trading at 2022-24E EV/EBITDAs of 6.7-5.0x, on our numbers, implying a 3% discount/a 5% premium vs. its peers.