Classification of NuWays AG to q.beyond AG

Company Name:	q.beyond AG
ISIN:	DE0005137004
Reason for the research:	Update
Recommendation:	BUY
from:	04.10.2024
Target price:	EUR 1.10
Target price on sight of:	12 Monaten
Last rating change:
Analyst:	Philipp Sennewald

Conference feedback: Efficiency measures bearing fruit

Topic: This week, we hosted the European MidCap Conference in Paris where we sat down with q.beyond CEO Rixen and CFO Wolters for some insightful meetings. Here are the key takeaways:

Margin expansion. Management reiterated that it is on track for continues margin expansion, confirming the targets for FY ‘24e (€ 8-10m) and FY ‘25e (7-8% margin). The company identified three layers to achieve this: (1) Focusing the business model on acquiring consulting and development orders, which consequently leads to orders for operations (Managed Services). According to management, a 5pp higher share of consulting & development revenues will lead to 2pp gross margin expansion. (2) Significantly increasing the near- and off-shoring ratio. Since 2020, q.beyond has lifted the ratio to 13% and is targeting 20% until FY ‘25e and 30% by FY ‘28e, stating that 5pp increase in the near- and off-shoring ratio allows for a 1pp gross margin lift. (3) Increasingly implementing AI, especially in Managed Services (50% of workforce), i.e. call center and service desk automation, going forward. In
our view, this could lead to significant cost savings in the mid-term. Based on this, the company’s targets seem absolutely achievable and are in line with our estimates.

M&A to fuel growth. Sitting on a comfortable net cash position of > € 30m, management reiterated that it is currently building up an M&A pipeline, with the intention for a first deal in the course of FY ‘25e. Here, the company will focus on targets with software-based industry knowledge, preferably in the public, healthcare or energy sector. Moreover, CEO Rixen stated, that another goal would be to enter new regional markets via M&A. Overall, we expect targets to be in the range of € 10-20m sales. Hence, we expect several acquisitions in the coming years. In addition to the strong cash positions, the company also still owns their own data center in Hamburg, which could probably be sold for € 40-50m (eNuW) in order to unlock additional funds.

Promising current trading. After the consulting business had a lackluster H1 performance (-11% yoy), management made a promising appearance regarding the performance in Q3, stating that the company achieved a higher utilization rate than in the previous quarters.

Valuation continues to look undemanding as shares are trading at only 6.1x EV/EBITDA

You can download the research here: http://www.more-ir.de/d/30991.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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