Einhell released Q4 results in line with prelims, showing a slowdown versus previous quarters. Group sales decreased by 5% yoy to € 216m, bringing full year sales to € 972m (-6% yoy). In DACH, Einhell continued to experience a somewhat muted consumer sentiment, explaining why regional sales declined by 8.1% yoy. Meanwhile, both Western and Eastern Europe experienced healthy yoy growth of 7.2% (Q3: 1.5% yoy) and 17.8% (Q3: 32.1% yoy), respectively, while overseas markets experienced a pronounced contraction of 16.7% yoy (Q3: 4.8% yoy), mainly driven by adverse currency translation effects (relative weakness of Australian and Canadian dollar) as well as muted consumer sentiment in Australia.

While the gross margin rose 2.8pp yoy to 43.2% supported by easing supply-chain constraints and higher PXC share (44% of sales or +4pp yoy), Q4 EBT fell by 31% yoy to € 12.6m, bringing full year EBT to € 75.4m (7.8% margin vs. 8.5% in FY22). This largely resulted from (1) negative operating leverage due to fewer orders by DIY chains (high inventories built up in previous years) and (2) PPA effects from the acquistions in Canada and Thailand (adjusted for these effects EBT margin would have been c. 8%). Still, Einhell was able to exceed pre-pandemic levels (Q4'19: 4%) and managed to significantly reduce working capital (-28% yoy) and thus boost FCF generation in FY'23 to € 197m (eNuW: € 175m, +514% yoy), which should indicate fewer promotional activity going forward.

The company issued a solid FY24 guidance with sales expected to grow by 6% yoy to € 1,030m (eNuW: € 1,030m, eCons: € 1,039m) partially driven by an easier comparable base as well as easing consumer sentiment in DACH (38% of sales), along with overseas markets (26% of sales) likely benefiting from the introduction / continued expansion of the Power X-Change platform (e.g. Canada). The EBT margin is seen to come in at 7.5-8.0% (eNuW new: 7.9%, eNuw old: 8.2%), implying an EBT of € 77-82m. This should be supported by the sustained trend towards higher-margin Power X-Change products leading to positive mix effects, offset by higher personnel expenses stemming from acquistions in Vietnam and Thailand and higher marketing expenses. The latter should strengthen Einhell's brand in preparation for entering new markets through the acquisition of a smaller local DIY brand and gradually replacing the assortment with best-in-class price/value PXC products.

Against this backdrop, valuation looks undemanding, trading at 9.6x PER 24e and a 10.5% FCF yield. BUY, PT € 227, based on DCF.