Einhell released Q1 results in line with expectations, showing healthy top and bottom line growth versus Q1’23 and Q4’23. Despite an ongoing depressed consumer sentiment, sales grew by 7.8% yoy to € 270m (eNuW: € 265m), driven by higher demand for the company’s Power X-Change products (+9ppts yoy to 50% PXC share), particularly pronounced in DACH, where sales grew by 9.6% yoy to € 110m (PXC share +13ppts to 62%).  While Western Europe declined by 12% yoy, sales in in Eastern Europe continued to perform well, growing 16% yoy after 18% growth in Q4’23; overseas market showed solid growth of 11% yoy, while at the same time recovering sequentially (-17% in Q4).

EBT increased by 11% yoy to € 22.6m (eNuW: € 20.9m) with the margin increasing 0.2ppts yoy to 8.4%, mainly due to operating leverage, offset by PPA effects with regards to the company’s acquisitions in Canada and Thailand. Furthermore, the gross margin decreased by 1ppt to 35.8% due to easing but still noticeable cost inflation. Personnel expenses increased by 8.4% as an elevated employee base in combination with the acquisitions in Thailand and Vietnam weighed on operating profitability. Having said that, along with Q1’23, the Q1’24 EBT margin of 8.4% still marks a considerable improvement to EBT margins pre-Covid (+2.4ppts from 6%) and Covid (+0.8ppts from 7.6%) and a decent inventory management (c. -18% yoy to € 341m in Q1) should indicate fewer promotional activities going forward.

With that, Einhell confirmed its FY24e guidance of 6% sales growth yoy to around € 1,030m (eNuW: € 1,030m) and an EBT margin of 7.5-8% (eNuW: 7.9%). In our view, this looks achievable as the healthy sales growth and solid EBT profitability in Q1 should provide confidence, aided by a less challenging H2’23 comparable base. The key margin drivers should be easing freight costs and raw materials prices as well as long-term currency hedging to avoid extreme fluctuations in purchase prices.

After two promising acquisitions in Thailand and Vietnam in 2023, Einhell reiterated its commitment to further international expansion with a particular focus on a potential US market entry that should provide the company access to the largest DIY market globally. Given that Einhell has a sound track record of expanding internationally via M&A, rolling-out its leading Power X-Change platform in this market should drive further market share gains. While short-term macro challenges continue to weigh on operating performance in FY24e, Einhell remains a key beneficiary of the structural transition towards cordless power tools. We reiterate our BUY rating with an unchanged PT of € 227, based on DCF.