Topic: INDUS announced last Friday the acquisition of DECKMA, a system supplier of technical marine equipment, which now belongs to the Engineering segment. Further acquisitions are planned during the remainder of the year.

INDUS acquired 75% of the shares in DECKMA and holds an option to acquire the remaining 25% in 2026. INDUS will keep the existing management team after the acquisition in place. DECKMA is a specialist in lighting and fire alarm systems, corrosion protection technology, and automation solutions for ships. Customers of DECKMA are in the shipbuilding and offshore industry, such as manufacturers of cruise ships, merchant ships and mega yachts.

The company generates c. € 19m in revenue and is growing profitable. Further, we estimate DECKMA to deliver a low double-digit EBIT margin and the transaction multiple to be around 6x EBIT. This leads to an estimated purchase price of € 13m (eNuW). With that, INDUS has spent € 31.5m (eNuW) on M&A this year, which leaves still room for further acquisitions to meet the € 70m annual budget. The company is confident of using the full budget this year due to several attractive opportunities and expects another acquisition to be made in the near future.

We interpret the acquisition as positive news as historical EBIT multiples in the German Small Cap M&A market have come down considerably in the recent years. Further, the global number of container ships increased steadily over the last decade, driven by globalization of the economy. In addition, growth potential should also come from the increasing number of offshore wind farms. For instance, EnBW started this year to build the largest German offshore wind farm named “He Dreiht” around 110km west of Helgoland. Ships are not only needed to build the 64 wind turbines for “He Dreiht” and other wind farms, but also for maintenance after the wind turbines started operating, which could lead to recurring revenues.    

INDUS remains a BUY in our view as the company is (1) trading at only 7x forward P/E (eNuW), (2) offers an expected dividend yield of 5.3% (eNuW FY24e: € 1.2 per share), and (3) delivers a strong FCFY24e of c. 10%. We continue to like the stock and keep INDUS in our Alpha list.

Reiterate BUY with an unchanged PT of € 34, based on FCFY24e.