Sonel - Valuation, DCF Valuation, Change of financial forecast - Part II
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Share
VALUATION
We calculated the value of one share of Sonel SA as the average of the comparative valuation (we included ratios for the forecast period 2023-25) and DCF. On this basis, we determined the current value of the shares at PLN 12.9.
Foreign companies are valued at a high premium to Sonel, which is a permanent trend (they are largely global companies - geographical diversification, often operating in many segments - product diversification) and therefore have been excluded from the valuation and given only for illustrative purposes. On the other hand, domestic companies give lower indications.
The increase in the valuation results primarily from the change in the parameters of the DCF model, but also from higher forecasts (assumed approx. 50% increase in profits in 2023-2025).
DCF VALUATION
Assumptions:
- We rely on our own forecasts of consolidated results presented in this report,
- The value of cash flows discounted as at the date of publication of the report,
- Net debt as at 31/12/2022 in the amount of PLN 9 million,
- Lower effective tax rate in 2023-26 (tax relief), then 19%,
- Long-term growth rate after the forecast period equal to 0%,
- Share of equity in financing assets 100% (conservative financial policy),
- Risk-free rate of 5.9% (previously 7.0%), risk premium of 7.4% (previously 7.2%), beta of 1.0 (unchanged).
DCF VALUATION
Below we present WACC calculation:
PEERS VALUATION
CHANGE OF FINANCIAL FORECAST
We draw attention to the following factors that will shape Sonel's results in the coming years:
- Continuing good economic situation for the company's products. The Management Board pays particular attention to the development of RES and electromobility generating demand for solutions offered by Sonel. In addition, we are counting on larger orders from maintenance services (industry, energy), especially in the environment of high electricity prices. There is a visible increase in orders in relation y/y, and the interest in Sonel products measured by the number of inquiries is even higher (which indicates high activity of customers looking for attractive offers and may turn into orders in the future).
- The launch of a new IT platform common for products from the new line of Sonel meters has been announced for 2024. We expect this to increase the dynamics of the company's revenue growth in the core business in 2025-2026, above our previous forecasts.
- Good relations with the main partner and gaining new clients in the area of contract assembly services. The Management Board expects the continuation of cooperation with the American Lincoln Group in 2023 (responsible for approx. 90% of revenues in this segment) at an equally high level due to the large and clearly perceptible involvement of Sonel in supporting this activity. Sonel also managed to attract new clients from various countries. The sale of service assembly, although less profitable, allows you to allocate part of the costs, improving overall profitability. in 2023 stabilization of prices and availability of components is expected.
- Increased production capacity thanks to investment in a new assembly line. At the turn of 2023/24, a new production line is to be launched at the plant in Åšwidnica, allowing for further increases in the production of meters without the need to reduce assembly services. The Management Board points to the end of the manufacturer's support for the previously used assembly line as the main reasons for this investment (risk of production downtime and untimely execution of orders) and the growing portfolio of orders (both in meters and services). The additional line will allow for more flexible work, due to the time-consuming conversion of the line and its adaptation to the production of new series of products (printed circuit boards). The increase in production capacity and optimistic assumptions regarding the continuation of cooperation with Lioncoln allowed us to raise our forecasts in the field of service assembly.
Michał Sztabler
Equity Analyst
michal.sztabler@noblesecurities.pl
+48 22 244 13 03
