The Q2'23 period was another quarter of positive earnings surprise from Elektrotim. The earnings conference also highlighted the positive outlook for the next quarters, which implies a seasonal improvement in 2H and an increase in y/y results in 2023.
Sentiment towards the company was spoiled by the filing of Zeus' bankruptcy petition. At the same time, we note that the value of this entity was already written down to zero after Q2'23, and Elektrotim's current financial exposure is limited to ca. PLN 3-4m. The peri-election period translates into low decision-making in awarding new public tenders, but the company's portfolio already fills a large portion of its 2024 revenue forecast.
On the positive side, we note the BG's announcement in September of tenders for perimetry on border rivers with Belarus. Following the 1H'23 results, we are upgrading our modelled earnings forecasts (our previous EBITDA forecast was 57% executed after 1H'23, and management believes the next quarters should be better due to seasonality).
We set our current target price at PLN 17.1, which implies reiterating a Buy rating. Elektrotim's Q2'23 results sustained the company's year-long positive earnings trend. In Q2'23, Elektrotim posted revenue of PLN 128m and net profit of PLN 11.2m, which is the best Q2 in the company's history. At the same time, at the end of Q2'23, the company recorded (as expected) a marked deterioration in its cash position (a significant increase in demand for working capital; we expect the situation to gradually improve in H2'23).
After Q2'23, the Group's backlog amounted to PLN 626m, about half of which, in our view, is still to be executed in 2023. Management's goal after 1H'23 is to at least maintain margins. Seasonally, we note that 2H is usually stronger than the beginning of the year; management believes there is no indication that the traditional seasonality will not be maintained this year. We currently assume the company will generate PLN 535m in revenue, PLN 50.5m in EBIT and PLN 37.7m in net profit in 2023.
We take a more conservative approach to 2024 (the company is mainly pursuing contracts with deadlines <18m, the competitive environment for 2023 tenders is more challenging, and the situation on the cost side may turn around if EU funds are unblocked)
