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EVDI slashed its FY24 guidance in order to reflect the “historically unprecedented real estate crisis” that lasts longer than previously expected. Further, the company issued two convertible bonds to secure the arising new capital requirements. In detail:

EVDI cut its income guidance to € 2.3-2.7m

from previously € 4.9-5.8m. This is significantly below our estimate of € 5.6m and below previous year’s figure of € 4.5m. Accordingly, EBIT was reduced substantially to € -3.5 to -4.1m from € -1.9m before (vs. eNuW: € -2m vs € -3.9m in FY23). The reasons for the cut are manifold in our view: 1) Project defaults paired with the delayed payback of the mezzanine tranche of projects of financed projects deteriorating the trust of clients, which makes it more difficult to convince them in the future, 2) interest rate cuts are delayed and not as meaningful as initially anticipated 3) construction costs and real-estate prices normalized slower as expected. All that should further burden the number, avg. volume and margin of financed projects, which ultimatively should burden the topline – least for the remainder of FY24.

Positively, we should have already seen the through in the real-estate market and the recovery is already ongoing. Further, EVDI has diversified its business by offering new products that are rather contrary to real-estate investments such as deposit accounts, renewable energy projects (recently closed the first solar financing project with “Solarpark Eyendorf”, which was fully financed within a few minutes), ETFs as well as holistic wealth management. This initiated diversification should reduce the dependency from the very cyclical real-estate project business, stabilizing the income and margins.

On the back of the clouded outlook for FY24, EVDI identified additional capital requirements which will be covered by the majority shareholder via two convertible bonds with a total volume of € 2.5m (the first with € 1.1m already subscribed, the second to follow after the AGM). The term of the convertible bonds is two years and the conversion price € 3.25 per share. Covering the additional capital requirements during the challenging situation emphasize the commitment of the majority shareholder in our view.

In light of the massive, unexpected guidance cut and the depressing outlook for FY24 we cut our estimates and downgrade to HOLD with a reduced PT of € 2.00, based on DCF.