STS Group: staying in the game (stays BUY)
We reiterate our BUY rating on STS Group (STS), with our price target (PT) cut to PLN 23.8/share, from PLN 29.4/share. While we expect the Polish gambling market to take a breather this year, driving STS’ NGR growth deceleration to 3% yoy, we expect the deep cost optimisation to allow for 20% yoy EBITDA growth. Going forward, we expect FY24E to be supported by a combination of UEFA Euro and the Olympic Games, with a consumer sentiment recovery. In the longer term, two-to-three years, we note additional upside potential from the liberalisation of the Polish regulations for the online casino segment. Overall, expecting a 2022-25E EBITDA CAGR of 14%, we see the company’s valuation at EV/EBITDAs of 8.7x for 2023E and 7.6x for 2024E, 27% and 18% below its peers’ averages, as attractive. Finally, assuming the full distribution of the profits to shareholders, we expect a decent yield of 5% this year and 7% in 2024E.STS Group AG is a Germany-based supplier of vehicle parts. The Company develops and manufactures solutions for acoustic and thermal insulation (soft trim) and components made of plastics or composite material (hard trim) for the automobile and trucking industries, focusing on four categories of vehicles: medium and heavy commercial vehicles (MHCV), light commercial vehicles (LCV), agriculture and construction vehicles (ACV), and light vehicles (LV), and supplying its products directly to Original Equipment Manufacturers (OEMs). The Company operates through three business segments: STS Acoustics, which includes mainly soft trim products with acoustic and thermal features that reduce noise and protect against heat; STS Plastics, which includes mainly hard trim products used for exterior body parts or interior modules, and Materials, which includes semi-finished goods from mixed composite recyclables. The Company operates production facilities in Europe, China, Mexico and Brazil.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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