We hosted a roadshow with CFO Jan Teichert, who provided confidence that Einhell’s temporary weakness seems to be an externally-driven issue in the short-term, while the company’s success story should remain robust in the mid-term.

Einhell continues to win market share driven by its Power-X Change platform (46% of sales in H1 23, +3pp yoy) and powerful marketing campaigns (F1, FC Bayern München). In the German cordless power tool market, Einhell’s share rose by 0.1pp yoy to 17.2% while market leader Bosch lost 2.4pp yoy to 33%. In German cordless garden tools, Einhell expanded its leading position with its share rising by 1.0pp yoy to 36.2% in H1 23. Hence, management showed conviction regarding Einhell’s mid-term prospects and confirmed its FY 29 sales target of € 2bn and at least 8% EBT margin (vs 4-6% pre-CoV).

Temporary weakness in Germany no reason for concern. While DACH indicated a potential sales recovery in Q2 (13% yoy), Q3 proved to be more volatile than expected due to sustained inflation as well as elevated inventories. From Q4 onwards, however, 1x1 discussions with DIY clients indicate that inventories look set to normalize soon and Einhell should continue to win market share. Coupled with an easier comparable base, this should provide confidence into a sales recovery in Q4.

US market provides growth opportunity. Following its successful international expansion in e.g. Australia and Canada, management emphasized the potential of the US market. A potential market entry could happen already in FY 24 via Einhell’s proven success model: Gaining market access through the acquisition of a small- to mid-sized local DIY brand and gradually replacing the assortment with best-in-class price/value PXC products. The US market looks attractive given that it is by far the largest DIY market globally and Einhell’s major rival Ryobi seems to neglect the online channel as well as Tier-2/3 DIY stores, which Einhell aims to tackle.

In FY 24e, Einhell looks set to return to growth on the back of easier comps, sustained market share gains, positive M&A and FX effects. Hence, we model 6% sales growth yoy to € 1,050m in FY 24e and EBT margin is seen to recover slightly by 0.3pp yoy to 8.3% thanks to lower input costs, positive mix effects and FX, which should turn into a tailwind latest in H2 2024e. Against this backdrop, valuation looks undemanding, trading at 8x PER 24e and a 12% FCF yield. BUY, PT € 225, based on DCF.