Einhell released final Q4 results, showing a slowdown versus previous quarters. Group sales decreased by 6% yoy to € 227m. In DACH, Einhell has started to experience a deteriorating consumer sentiment, explaining why regional sales declined by -5.8% yoy. The weakness started to also leave its mark in Western Europe (-4% yoy vs +4% yoy in Q3) and Eastern Europe (-1% yoy vs +5% yoy in Q3). Meanwhile, overseas markets continued to grow 12% yoy in Q4 as Australia and Canada have been largely unaffected by macro headwinds. The resulting mix effect also explains why PXC sales slightly decreased qoq to 40% of sales (+1pp yoy). Q4 EBT fell by 21% yoy to € 18.3m. While the gross margin improved by 2.7pp yoy to 40.4% supported by price increases and easing supply-chain constraints, general cost inflation and negative operating leverage explained the EBT margin decline of 1.5pp yoy to 8.1%. Still, Einhell was able to exceed pre-CoV margin levels with a decent inventory management (5% yoy to € 473m in FY22), which should indicate fewer promotional activity going forward.

The upbeat FY23 guidance was reiterated. Sales are expected to grow by 3% yoy, implying sales of around € 1,060m (eNuW: € 1,061m, eCons: € 1,055m). While DACH should remain broadly stable yoy (40% of sales) due to ongoing pressure on consumer spending, in our view, overseas markets (25% of sales) are expected to benefit from the introduction of the Power X-Change platform, i.e. Canada. On group level, Einhell aims to increase the Power X-Change share to 51% of sales by the end of FY23e supported by the growing number of devices (250 in FY22 vs 450 in FY27e). Additionally, supply-chain constraints seem to be easing, which should improve product availability. The EBT margin is expected to come in at 8.0-8.5% (eNuW: 8.3%, eCons: 7.7%), implying an EBT of € 85-90m (eNuW: € 88m, eCons: € 79m). The key reason should be improving supply-chains as well as easing freight costs and raw materials prices. Moreover, Einhell’s production is mostly located in China, which should benefit from the reopening in FY 2023. Additionally, the sustained trend towards high-margin Power X-Change products should lead to a positive mix effect.

In sum, while short-term macro challenges look set to weigh on the operating performance in FY23e, the mid-term case remains intact as Einhell should be a key beneficiary of the structural transition towards cordless power tools. Valuation looks undemanding with shares trading at 10x PER '23e. BUY, PT € 240.00, based on DCF.