Next week, 123fahrschule will report H1 figures. H1 sales are seen to increase by 6% yoy to € 11.1m (eNuW), which once again looks set to be predominantly driven by the Private Customer segment (eNuW: € 8.4m) thanks to the imposed price increases, while the number of private customer registrations should have remained rather stable. Moreover, we expect the Professional Driver Education with € 1.3m sales (+15% yoy; eNuW) the Driving Instructor Training segment with € 1.5m sales (+10% yoy; eNuW) to continue on its strong growth paths.

However, EBITDA is seen to come in slightly softer yoy at € 0.1m (vs € 0.2m in H1’23), mainly due to a change in accounting, as the company is now building up provisions (i.e. vacation accruals) throughout the year instead of once a year in December. Adjusted for this effect, EBITDA should rather be in the region of € 0.5m (eNuW).

Overall, we expect the release to fully underpin our investment case, although it should only fully unfold next year when the positive effects from online theory lessons looks set to materialize. In fact, c. 50% of theory lessons can be held online, which should save the time resources of driving instructors and hence increase efficiency. This should ultimately ramp-up returns and profitability.

Moreover, 123f intends to further increase efficiency with the implementation of driving simulators, which allow learner drivers to complete up to 10 lessons in the future. According to management this should lead to significant scale effects as it increases the FTE per learner driver ratio. Through the acquisition of Foerst GmbH, 123f has additionally secured the sourcing of simulators. The company also plans to expand Foerst’s portfolio with its proprietary software elements in order to offer an improved product also to third party market participants as part of a rental model (not yet included in our model).

Furthermore, one of 123f’s key USP’s remains its in-house instructor training (10% market share), which grants the company a significant competitive edge given an average age of instructors in Germany of around 55 years. Unlike 123f, many competitors face succession problems. In order to take advantage of the situation, the company thus plans to open another instructor training center in FY25, increasing the annual capacities by another 30%.

Against this backdrop, the stock remains a BUY with an unchanged PT of € 7.20 based on DCF.