According to preliminary figures, Sygnity delivered 22% of our FY2024 full-year sales forecast, 18% of estimated EBITDA, and 20% of the expected FY net profit, in 1Q'24. Compared to the same year-ago quarter, the company achieved revenue growth of approx. 18% and EBITDA growth close to 24% in 1Q'24.
Keep in mind, however, that the quarterly results were influenced by two recent acquisitions (of which the financials of Sagra Technology likely only began to be consolidated in early March 2024). Organic earnings growth was in line with our expectations, as set out in the 15 April 2024 research update on Sygnity. Hence, we stand by our FY2024 earnings forecast and target price for the company. Sygnity stock has markedly outperformed the broad market benchmark in the year to date.
Indeed, Sygnity has substantially improved its earnings by optimizing its backlog, raising prices for selected customers, and reducing headcount. We assume the company will continue to take measures to grow sales profits in 2024. On the other hand, SGN stock is trading well above its peers on both EV/EBITDA and P/E multiples. Meanwhile, we see limited room in the long term for further gross margin expansion given that Sygnity already achieves some of the highest margins compared to other Polish IT companies (our 2024 gross margin forecast not counting the latest acquisitions is 35% vs. a Polish IT sector median of 25%)
