Topic: 123fahrschule looks set to report a decent set of FY ’23 figures in Q1. Here is what investors can expect from the release:

After a strong first nine months, we expect the company to keep up the momentum and report an increase in total sales by 21% yoy to € 20.2m (eNuW; eCons: € 20.9m), driven by strong growth of the Private Customer segment to € 15.9m (+18% yoy) as well as the Professional Drivers Education segment, which is seen to more than double yoy to € 2.2m. The Education segment however is seen to provide a muted development and come in at € 2.2m (+1% yoy), although we expect a sequential improvement in Q4 (flat yoy vs -14% in Q3). Despite a neutral EBITDA at 9M ‘23, the company is seen to report a FY EBITDA of € -0.7m as profitability is seasonally weak in Q4 due to (1) students' general reluctance to take driving lessons during Christmas and (2) higher other OpEx based on the built up of provisions, especially vacation accruals, which happens almost entirely at YE. Still, this will be a significant improvement compared to a negative € 2.7m EBITDA in FY ’22, thanks to the successful implementation of cost-cutting measures leading to efficiency gains.

What to expect for FY '24e: 123fahrschule looks set to remain on its growth path, as sales is seen to increase by 13% to € 22.9m (eNuW; eCons: € 24.7m), which should be largely driven by the Private Customer segment (+12% yoy to € 17.8m) based on increased capacity of driving instructor FTEs (+22% yoy at YE ‘24e). Mind you, 123fahrschule is seen to cope well with the general shortage of driving instructors thanks to its own driving instructor training centers.  Moreover, we expect another strong growth contribution from the Professional Driver Education segment (+20% yoy to € 2.6m), as an increased focus on corporate clients (i.e. logistics, retail, agriculture) is seen to offset a possible negative effect of the current government budget crisis on the awarding of education vouchers.

Against this backdrop, EBITDA is seen to further improve to a neutral level (eNuW; eCons: € 2.1m) before turning positive in FY ‘25e (eNuW: € 2.2m; eCons: € 3.5m). Keep in mind, that the likely return of online theory in 2025 is seen to allow for higher capacities and improved constructor utilization, thus supporting growth and profitability at 123fahrschule.

Valuation looks undemanding at 0.6 EV/Sales ‘23e. Reiterate BUY, € 8.70 PT based on DCF.