Solwers

We forecast revenue to have grown slightly overall.

We revise our target price for Solwers to EUR 2.5 (was EUR 2.65) reflecting negative forecast changes. The H1 report was underwhelming, and profitability remained weak. A market recovery is still some time away, and, although the building blocks for recovery are clearly in place, uncertainty about improving earnings has increased. Breaches of covenants also raise the short-term risk profile, and overall, the risk/reward ratio leans negative in our view. We are lowering our recommendation to Reduce (previously Accumulate) and will wait for concrete signs of a recovery in earnings levels.

Solwers reported a weaker-than-expected result this morning. Although revenue grew in line with our expectations, intense price competition weighed on margins and consequently on the result. A broader market recovery is still some way off, although the company expects the market to pick up towards the end of the year.

We expect Solwer's revenue to have grown from the comparison period thanks to acquisitions, while our profitability estimate is roughly at the same level as a year ago. Since the company does not provide numerical guidance, we will pay close attention to any updated comments regarding the outlook, particularly regarding whether the company has observed concrete signs of an increase in market activity.

The change is due to the retirement of the current CEO, which Solwers announced earlier this spring. In our opinion, the new CEO's background provides a solid foundation for success in his new role.