Disappointing Half Year Results Nedap
Although Nedap announced they had a difficult first half of the year and it was expected, the update is somewhat disappointing. However, current valuation remains very attractive for the long-term.
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Today Nedap announced their half yearly figures for 2024. Although it was expected, as the first half year had a difficult comparison period with the catch-up effect in 2023, the revenue dropped and the market has been quite soft, especially in Retail and Livestock. However, Nedap sees the market for Retail improving a bit towards the end of the quarter and good to read Carter’s prolongued their contract.
I had hoped for an announcement of order wins on the healthcare side as well, but the only thing Nedap communicates is the market position has been expanded. Here is their full communication to the market: Nedap half yearly figures 2024
Short summary of the half year results and an updated fair value valuation:
Revenue
8% down in HY1 2024 as a result of lower revenues in Retail and Livestock.
Recurring revenue up 20% and accounts for 39% of total revenue.
Added value as a percentage of revenue increased from 69% to 71%.
Guidance full year has been adjusted to revenue growth second half year (was revenue growth full year).
In order to reach revenue growth full year the revenue in 2HY should grow by 8%.
My targeted revenue for 2024 in my Nedap Deep Dive was 283.4M and seems too high. Although Retail seems to be picking up, I will now calculate with a flat revenue for the full year versus last year.
Operating margin
Nedap was ready for growth and if growth will take longer, this will hit the margins. Personnel costs increased due to more employees and an increase in salaries. I didn’t expect a further increase in employees, so a bit surprised here.
Operating margin came in at 8.5% versus 12.0% same period last year, which is too low given the 15% EBIT target. But from second half on this should improve drastically.
Fair value adjustment
In my last analysis I have been calculating with an increase in revenue in 2024 and an EBIT of 15% as per 2026. I will move this one year to 2027 to be more on the safe side, although Nedap today communicated to reach this in 2026.
My revenue I have adjusted and will keep it flat this year, also given the market for Retail is slightly improving versus the first half.
My fair value was 118.75 and apparently this has been too optimistic given the update of today. With the adjusted revenue and the one year delay in the EBIT of 15% the newly calculated fair value comes in at 90.00 euro, which is still significantly above current stock price.
The long-run case for Nedap didn’t change, however there is a bit delay. With Compound & Fire we invest for the long-run and as long as the thesis isn’t broken we remain a long-term shareholder.
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