Q2 met expectations on sales and delivered 6% organic growth, after four quarters of negative figures. We expect this to continue, mainly driven by System sales that are facing easier comps throughout 2024e, but also supporting momentum from NetApp and Dell in their storage businesses. AI and increased investments in cybersecurity are driving forces for Proact. The 3% organic growth in Service sales in Q2 was a slight disappointment (ABGSCe 6%), but we expect the level to come back to mid-single-digits again when System sales growth improves as well. The fact that the company sees better demand across almost all regions is encouraging, in an environment where for example Dustin (IT hardware) and Addnode (IT software) are seeing some headwinds and delayed sales cycles across their customer groups (also concentrated to Northern Europe and the Nordics). For H2e, we expect organic growth rates of 9-10% for Proact, which should continue to drive adj. EBITA growth of around 15-25%.
Small positive revisions
We leave our sales estimates relatively unchanged (-1%), although we raise opex somewhat. The better-than-expected gross margin leads us to raise adj. EBITA by 2-3% in 2024-26e.
Valuation gap has narrowed to peers
The share is up 77% YTD, which we think is partly explained by strong share runs for Proact's suppliers NetApp (+45% YTD) and Dell (+65% YTD), but also fuelled by the valuation gap to peers. This has now narrowed, and on our estimates the share trades at 10.5x 2024e EV/adj. EBITA and 9.9x 2025e, which is 5-12% below peers, vs 40-45% when the year started.
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