q.beyond is expected to deliver solid Q2 results on 14^th August. While we expect a slight slowdown in growth after a strong Q1, profitability should improve thanks to internal workload optimization and the absence of one-offs in connection with staff restructuring (€ 1.3m in Q1).

Q2 sales are seen to grow by 10% yoy to come in at € 46.3m, driven by the continuous recovery of the SAP segment (eNuW: +4% yoy), based on the strong order backlog following the record order intake of € 228m in 2022. Moreover, customers are coming under more and more pressure concerning the S/4HANA transformation, which should benefit the segment going forward.

Q2 EBITDA is expected to improve sequentially, coming in at € 1.2m (-19% yoy), partly driven by a reduction of external workforce thanks to optimized internal workforce utilization. Moreover, we expect first effects of the “One q.beyond” strategy to become visible, as the company already introduced cost cutting measures like the elimination of duplicate structures and an increased focus on the near shoring locations in Spain and Latvia.

Besides the upcoming results, current trading appears promising. Just recently, q.beyond announced two important contracts:

(1) Libri, one of Germanys leading book wholesalers, commissioned q.beyond to manage the transformation from its internally developed Oracle-based ERP system to SAP S/4HANA. The project is set to be completed by 2026 and will contribute annual revenues in the lower single digit €m space (eNuW), usually generating margins of c. 10%.

(2) q.beyond extended the contracts with one of its most important customers, Tchibo, for a period of five years for most subsections. As q.beyond helped Tchibo to introduce S/4HANA in 2021, it will henceforth further transform and modernise Tchibo’s IT infrastructure as well as its process and application environment. We estimate annual revenues of € 9-10m at margins of 10-12%.

Valuation continues to look undemanding, especially after the recent share price weakness, as the stock is trading at 2.9x EV/EBITDA 2024e vs 2y forward-looking historic average of 8.8x.

We reiterate BUY with an unchanged PT of € 1.30 based on DCF.