Costs in control even at the bottom of the cycle
Despite slow momentum on the top line, Siili’s H2 and Q4 report showed that the costs can be managed reasonably well and profitability and cash flow stayed at a decent level even at the bottom of the cycle. Yet, we end up forecasting a bit slower turnaround and higher salary inflation with 2024E EBITA down by 8%. Fair value range of EUR 15-17 reiterated.
Q4 outcome: Guidance sees us cut 2024 margin expectations
Although Siili delivered better-than-expected Q4 profitability, we cut our 2024 profit estimates. The company’s EBITA guidance range mid-point was somewhat below our previous estimate and we end up forecasting higher salary inflation. The cost savings, i.e. temporary lay-offs, will still offset the soft Q1, but looking at the year-end the costs are set to rise more than we previously pencilled in. Nevertheless, our conclusion from Q4 is that Siili can adapt its costs fairly well to match a slower market.
Slow start to 2024, but signs of cheering market activity are there
Siili’s management was cautiously hopeful that the market could gradually pick up as it sees somewhat cheered customer requests. Also, the long-term underlying market trend has remained unchanged and we actually think the AI revolution could become the next booster for the digital transformation consultancy market. However, things will not change overnight and Q1 is likely to be soft with tough comparison numbers. We forecast 2024 revenue growth of 3% but see Q1 being down 9%.
Shares trading at EV/EBITDA of 5.4x at the cycle bottom
We find Siili’s multiples attractive assuming that Q4-Q1 marks the market bottom. Naturally, any new shock to the global economy would wipe out growth expectations from H2 and lift the multiples. Yet, we repeat our fair value range of EUR 15-17.
https://research.sebgroup.com/corporate/reports/125888
SEB:n ennusteilla Siilistä saadaan todellinen osinko-osake vielä ellei pörssikurssi korjaa selvästi ylös (DPS-rivi = Osinko).