Topic: INDUS released solid final FY24 numbers in line with prelims and presented its mid-term targets for 2030 at the CMD in Frankfurt. Here are our key takeaways:

To recap, FY24 sales decreased 4.5% yoy to € 1,722m due to macroeconomic headwinds especially in the construction industry and pricing pressure in Materials Solutions (former Materials). Q4 sales came in at € 440m, flat yoy. Order intake decreased across all segments to € 1,611 in total with a book-to-bill of 0.94x and 3.7% below last year due to a persistently weak economy. Consequently, the order backlog decreased 10.4% yoy to a low level of € 637m. FY adj. EBITA came in at € 154m, -18.3% yoy due to a top-line decrease and higher personnel expenses (+3% yoy) despite 161 fewer employees. This leads to a still solid 8.9% adj. EBITA margin (-1.5ppts) considering the current economic environment.

Engineering FY sales remained flat yoy (-0.5%) but adj. EBITA decreased by 21.5% due to an unfavorable product mix in H1. Infrastructure recorded a 3.9% decline in sales, however, with a 2.9% increase in adj. EBITA thanks to a reduction of 7.4% yoy in cost of materials and a positive one-time effect from the sale of a non-controlling interest in BETOMAX for € 2.6m. Sales in the Materials Solutions segment dropped by 8.9% and adj. EBITA disproportionately by 25.2% yoy due to a weak metals sector and pricing pressure. In particular suppliers of the construction and agricultural industry are currently facing low demand.

On a regional sales split, top-line in Germany decreased by 8.2% (48% of total sales), while sales in EU declined by only 4.5% and in third countries even increased by 1.8% yoy. The continued investment reluctance in Germany and a still muted GDP growth forecast of 0.3% for FY25e by the IMF, gave INDUS reason to expand its geographic M&A scope. Growth acquisitions will be expanded to Europe and add-on acquisitions are searched globally with a particular focus on North America. This is positive news in our view, as INDUS will become less dependent on the German economy and can now search more opportunistically in different geographies for value accretive M&A targets. -to be continued –

Ambitious mid-term target: Management aims for sales of € 3bn and adj. EBITA of € 330m until FY30e, not factoring in any potential impact of Germany’s € 500bn infrastructure special fund. € 700m additional sales are expected to come from organic growth (implied 5.9% CAGR) and € 600m from acquisitions, for which the company plans to spend approximately € 500m. INDUS sees a huge market potential for succession solutions in Europe. Around 90% of family businesses in Europe see an external investor as a suitable succession option and long-term oriented investors such as INDUS who preserve the DNA of the target business are often preferred by Mittelstand companies. Although we believe the targeted 11% adj. EBITA margin is well in reach, we take a more conservative view on organic top-line growth. Thus, we estimate INDUS to reach c. € 500m organic sales growth until FY30e (implied 4.3% CAGR).

FY25e guidance in reach: INDUS expects sales between € 1.75-1.85bn (eNuW: € 1.79bn) and adj. EBITA in the range of € 150-175m (eNuW: € 164m) for the current year. Although a yoy decline in backlog, the guidance looks plausible in our view supported by € 28m annualized sales contribution from INDUS’ acquisitions since the start of the year. Further, the acquisitions made in FY24 have an annualized sales contribution of c. € 35m (vs. € 18.4m recorded sales in FY24).  

We reiterate BUY with unchanged PT of € 34, based on FCFY25e.