![Turbulent Q2'23 Results for [Company Name]: Strong Exports Offset Domestic Challenges](https://admin.es-fxmag-com.usermd.net/api/image?url=media/pics/turbulent-q2-23-results-for-company-name-strong-exports-offset-domestic-challenges.jpeg&w=1200)
• The company published its Q1'23 results on Thursday before the trading session.
• Q2'23 revenue amounted to PLN 45.4m (+22% y/y). Sales on the Polish market fell by 5% y/y. Export sales increased by 38% y/y (including a 54% y/y increase in Germany - the impact of a good situation in the solar PV industry).
• Gross margin improved significantly y/y (22% in Q2'23 vs 17% a year ago and 23% in Q1'23). We note the stabilisation of material costs, the effects of increased automation and high demand in the RES area. The Ukrainian plant is currently operating at full capacity.
• Production profitability was 22% vs 10% a year ago and 21% in Q1'23 (goods and other sales have higher profitability, but it was weaker both q/q and y/y).
• EBITDA was PLN 6.1m (vs. PLN 2.4m a year ago), We expected PLN 5.6m. Last year's base was not challenging (the outbreak of war in Ukraine led to perturbations in the company on both the revenue and production and cost sides). At the same time, we failed to repeat the record result of Q1'23, when EBITDA amounted to PLN 9.0m, mainly due to very good sales (in Q2'23, the economic situation in the industry was weaker with each month).
• Net income amounted to PLN 3.5m (vs. PLN -2.3m in Q2'22).
• Operating cash flow: PLN +3.9m (vs. PLN +2.7m a year ago).
• CAPEX: PLN 1.2m (PLN 2.7m in H1'23).
• Net debt after Q1'23: PLN 14.9m (vs. PLN 20.7m after Q1'23 - the decline was driven mainly by a PLN 4.8m subsidy).
• The company indicated that the order backlog for the main product groups is filled by the end of the year. The backlog of orders entering with longer lead times has declined sharply, and some have been postponed. Given the slowdown in demand in Europe, management expects weaker revenues and results in H2'23 vs H1'23. At the same time, management expects the full year 2023 to be better than last year.
BDM Comment: Q2'23 results were clearly better y/y (low base) and slightly better than our forecasts on profitability. The company showed strong export growth (Germany: +54% y/y), with weaker y/y domestic sales. At the same time, as we expected, a repeat of the record Q1'23 was not possible due to the deteriorating macro environment. The company is also taking a cautious approach to expectations for 2H'23, in which it may be difficult to repeat the 1H'23 results (we also pointed to such a scenario in our last recommendation of June'23, when we assumed PLN 13.7m net profit’23 - the 1H'23 execution is 67%). We point out that CAPEX is quite low after 1H'23; we expect higher expenses in 2H'23 due to ongoing investments, which should be completed in 2023.
