At the same time, we maintain that in the medium/long term, the company may be a beneficiary of the increase in expenditure on power grids and the military area (references and certificates held). In its 2023-25 strategy, the Management Board has outlined that the company is targeting at least PLN 350m in revenue and PLN 10m in net profit at the standalone level (50-75% is to be allocated to dividends).
In light of the 2022 results and 2023 prospects, these targets do not seem demanding. At the same time, the company has struggled to stabilise results in recent years, which translates into a discount in valuation. Following the finalisation of the sale of Procom in Q4'22, work was underway to divest the Zeus subsidiary.
The last report showed that the entity's situation was difficult (its value was written down to PLN 0.0m). Ultimately, Zeus' management filed for bankruptcy. Elektrotim's exposure is currently around PLN 3-4m (granted loan, guarantees on contracts and subcontract advance).
Of course, Elektrotim will not be able to raise funds from the sale of the company (Zeus used to generate ca. PLN 30m in external revenues, which, assuming EV/Sales valuation=0.2x, would give a potential valuation of ca. PLN 5-7m), but it is cutting out the risk of adding funds to the company in the future (the company has been struggling with profitability for years, and it has been relying heavily on intra-group orders recently). We do not see any loss of major competencies within the group.
Elektrotim is independently winning orders directly from the military sector.
