Topic: MAX Automation has another promising year in front of it. We expect the company to grow its topline by 7% in 2024e while sustaining last year’s profitability (eNuW).

Topline growth ahead: With several structural trends kicking in, MAX should be able to grow its revenue in the current fiscal year at a mid-single-digit growth rate. Around 35% of the growth is expected to come alone from MAX’s crown jewel bdtronic (eNuW). With c. 80% of bdtronic’s revenue coming from dispensing solutions mainly in the automotive sector, bdtronic largely profits from an increasing number of electric components inside and outside the vehicles. Different dispensing applications are used to protect electric control units from overheating, vibration during driving and environmental influences such as salt or dirt. MAX largest holding, Vecoplan, is expected to grow by 6% in 2024e (eNuW), outpacing the slow growing recycling market, due to its strong competitive quality. Vecoplan is an expert in producing machines and plants for shredding, conveying, and processing of primary and secondary raw materials, such as wood or plastic.

Consistent profitability: We expect MAX to deliver an EBITDA margin of 9.8% in 2024e, which is roughly in line with 2023e (eNuW). Going forward, margins should further improve to > 10% by 2025e due to economies of scale but more importantly due to an improving product mix from bdtronic. Despite labour cost pressure, the company has not only strong growth potential but can also improve margins in a tough market due to its technological leadership.

In addition to the improving operating performance, a successful divestment of the subsidiary MA micro (company news 08.09.2023) should be a notable share price catalyst, revealing that the value of the “parts” clearly exceeds the current Enterprise Value of the MAX Automation group, in our view. A strategic buyer should be willing to pay at least 10x EBITDA for this highly profitable and return-rich specialty business, implying a purchase price of above € 100m (eNuW).

Importantly, even after a divestment, MAX would own hidden Mittelstand champions such as bdtronic and Vecoplan, amongst other, whose combined value alone would well exceed the remaining (theoretical) € 200m EV of the group ex MA micro (eNuW), underpinning the undervaluation of the stock. Hence, we reiterate our BUY rating with an unchanged € 8.20 PT based on DCF.