Topic: Yesterday evening, Einhell released strong preliminary Q3 sales numbers above our expectations. Further, the company increased its sales and EBT guidance for FY24.

Q3 sales increased 15% yoy to € 264m (eNuW: € 250m), driven by the ongoing strong demand for the company’s Power X-Change products (c. 50% PXC share).    

While Q3 EBIT has not been released, we expect it to come in at € 23.9m (Q3’23: € 20.2m; +19% yoy), which would lead to a solid 9.1% margin (+0.3ppts yoy). The expansion of Power X-Change should be a major contributor due to its high gross margins (50% PXC share vs. 45% for 9M’23). Personnel expenses are seen be around last year’s level (eNuW € 34.0m vs. € 33.6m in Q3’23) as effects from wage inflation and a lower headcount due to the sale of Einhell Colombia and personnel changes at the subsidiary in Thailand should offset. However, we expect other operating expenses to increase yoy to € 45m or 17.1% of sales (vs. € 37.9m, 16.5% in Q3’23) due to:

(1) Higher outgoing freight rates, as the Houthi militia started attacking freight liners in the Red Sea, container ships have been taking alternative routes around Africa, which increased transit times by about 14 days.

(2) Higher marketing expenses due to the intense cooperations with the Mercedes-AMG PETRONAS F1 Team and FC Bayern Munich. Marketing and advertising expenses increased already successively in the last years and accounted for 7.4% of sales in H1’24 (vs. 5.7% in H1’23).

FY guidance raised: As a result of the positive business development, management now expects € 1,070m in sales (previously: € 1,030m) and an EBT margin of 8.0-8.5% for FY24e (previously: around 8.0%). Thanks to the strong top-line growth in the first 9M and the successful expansion of Power X-Change, the FY guidance looks plausible to us (eNuW sales € 1,080m; EBT 8.2%).      

Einhell remains a clear BUY in our view, as the stock is (1) trading at only 8x EV/EBIT, (2) delivers stable ROIC’s (eNuW FY24e 13%) above its cost of capital and has (3) substantial growth potential if the company can successively enter the US market.

We reiterate our BUY rating with a new PT of € 86 (old: € 84) based on DCF.