Classification of GBC AG to Cenit AG

9M 2024: Sales benefit from inorganic growth, earnings weighed down by one-off effects, guidance and our forecasts reduced, price target lowered to €22.00, Rating: BUY

Both organic and inorganic effects contributed to the 13.6 % increase in CENIT AG's revenue to €151.43 million (previous year: €133.31 million) in the first nine months of 2024. The companies CCE GmbH (acquired on 3 January 2024) and Analysis Prime LLC (acquired on 17 July 2024), which were acquired in the current financial year 2024 alone, have contributed revenue of €7.52 million since joining the group. Adjusted for the contributions of the two companies and for the base effect of the companies acquired in the previous year, which are now included for the full reporting period, organic growth was 4.3 %, close to the company's target of 5.0 %. 

The increase in sales revenue was offset by a decline in EBIT to €3.97 million (previous year: €4.60 million) and thus in the EBIT margin to 2.6% (previous year: 3.5%). This is mainly due to the acquisition-related expenses and the associated sharp increase in depreciation on acquired assets. While depreciation increased by €1.36 million, the acquisition costs amounted to €0.82 million. In addition, there was a negative one-off effect (€0.87 million) from the deconsolidation of the Japanese subsidiary. Adjusted for the special effects, CENIT AG would have achieved an increase in EBIT to €4.67 million (previous year: €3.95 million).

Despite the significant decline in EBIT, CENIT AG again generated a high cash flow from operating activities of €9.91 million (previous year: €8.50 million). This covered a significant portion of the purchase price for the two corporate acquisitions (€13.96 million). Together with the repayment of bank liabilities, the company continues to have sufficient cash and cash equivalents of €12.18 million.

In the run-up to the publication of the nine-month report, CENIT's management adjusted its forecast. On the sales side, the contribution of the acquired Analysis Prime was included in the guidance for the first time, with the company expecting sales of € 205 - 210 million (previously: € 197 - 202 million). However, adjusted for the inorganic effect, this corresponds to a slight reduction in the guidance, as the originally expected revenue contribution of Analysis Prime of USD 11.5 million (€10.6 million) would have led to a new guidance of €207.6 - 212.6 million. According to the company, this is due to the current weak demand from the automotive and aerospace industries, which is likely to lead to lower demand for single licences in the fourth quarter of 2024. However, delays in the start of the Analysis Prime order have also led to a reduction in revenue expectations at this company. The expected gross profit loss of around €7m coincides with extraordinary expenses that have already been incurred and higher depreciation (PPA depreciation), meaning that the company expects EBIT to fall to between €8.0m and €8.5m.

We are adjusting our forecasts to the new guidance and, on this basis, are reducing our forecasts for the coming financial years. The full-year inclusion of Analysis Prime, the cost-cutting measures introduced and the absence of one-off effects should lead to a revenue increase and a significant improvement in the EBIT margin in the coming financial year 2025. This trend should continue into 2026. On the basis of the adjusted forecasts, we have set a new price target of €22.00 (previously: €24.15). We continue to issue a BUY rating.