Solteq Software gaining traction
The good development in profitability, brought by previously taken measures and sales growth, is showing a positive effect on the company’s cash generation despite the interest expense burden and product development investments. We do not expect Solteq to go completely unscathed through the pandemic and have clearly lower growth expectations for Solteq Digital in 2021 while the good order intake and the build-up of recurring revenue from long-term contracts will support growth in Solteq Software. We also maintain margin estimates for 2021 at similar levels as in 2020 for now given the uncertainty but see potential for improvement in Solteq Software as the share of own products increases. On group level we estimate growth of 3.7% and an EBIT-margin of 8.8% in 2021.
BUY with a target price of EUR 1.90 (1.65)
Current valuation implies a 2020e EV/EBITDA of 6.4x. Even when comparing solely with the Nordic IT-service peers, valuation still appears attractive. We retain our BUY-rating and raise our target price to EUR 1.90 (1.65) following our revised estimates.
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