q.beyond will report Q3 figures on 13^th November. We expect a mixed bag due to structural headwinds and despite a continued strong recovery of the SAP segment. Here is what's worth knowing:

Sales look set to increase by 4.6% yoy to € 45.1m, which should mainly be driven by the continuous recovery of the SAP segment (eNuW: +11% yoy to € 8.7m). However, the otherwise strong Cloud & IoT segment looks set to show a significant slowdown in growth with a yoy increase of only 3.2% to € 36.4m (eNuW: -4.5% yoy organically, excluding the productive data acquisition). Besides the general market weakness and increasing buyer retention, the prolongation of the important Tchibo contract was likely taken out at inferior conditions, as the customer itself has been struggling recently.

Based on this, Q3 EBITDA is seen to come in at € 0.6m (vs € 1m in Q2), implying a 1.2% margin (-1pp qoq). The main reason for the sequential profitability slowdown should be negative mix effects in connection with the weak performance of the higher margin Cloud & IoT segment (8% contribution margin in H1 vs 6.9% in the SAP segment).

Despite the weak operations, we do expect management to confirm the FY guidance of € 185-191m in sales, € 5-7m EBITDA and FCF of > € -4m. While the lower end of the sales guidance as well as the FCF outlook should be in reach for the company, the EBITDA target looks highly ambitious and will likely only be reached thanks significant other operating income in Q4, which is related to a previous M&A transaction. Adjusting for this, the operating EBTIDA is rather seen to come in at € 1.8m (eNuW: € 0.3m after 9M).  

On a positive note, the company continues to provide a comfortable cash cushion with net cash of c. € 30m at year end. This should be more than sufficient to weather the currently weak market environment and leaving the option to execute on selective attractive M&A opportunities on the table. Here, the company repeatedly stated that it could aim for targets with a high public sector expertise.

Despite shares looking mispriced after the recent weakness and the stock trading at 6.4x EV/EBITDA 2024e (vs 2y avg. of 8.5x), the Q3 release is not seen to serve as a catalyst for a possible re-rating. We therefore cut our PT to € 1.00 (old: € 1.20) based on DCF - It remains a BUY due to the aforementioned fundamentals while at the same time highlighting the absence of catalysts in the short term.