Ailleron: Above-Average Margins, Double-Digit Earnings Growth, and Favorable Valuation
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Ailleron Above-average margins, prospects for double-digit earnings growth
Valuation and recommendation
Despite the dividend cut by PLN 1, we raise our target price from PLN 26 to PLN 28 and reiterate our BUY recommendation. A comparative valuation based on a group of global software houses yields PLN 36.3 per share. A comparison with Spyrosoft based on adjusted net profit for the last four quarters implies a valuation of PLN 36.0, but we note a rather temporary bottom in SPR's profitability and believe a certain premium, albeit not a large one, is justified.
Q3'23 Forecasts
We expect revenues of PLN 16m in FinTech and PLN 99m in Software Mind, where Q2 saw slightly higher revenues in the telecom sector, but we do not expect this effect in the current period, and furthermore, exchange rates have been the most unfavourable for the company's revenues in many quarters (average USD/PLN down 12% y/y and average EUR/PLN down 5% y/y). We forecast an operating profit of PLN 15m, the best quarter so far this year and comparable to the excellent Q3'22. Part of the FX exposure is still hedged. We expect a slight decline in net profit due to the absence of Pekao contract revenues, with some drag from team costs. This effect is expected to fade by the last quarter of 2023, with virtually no impact on the P&L from next year onwards. Traditionally, we expect the strongest results in the Ailleron group in Q4.
