Tamtron H2'24: Signs of a turnaround in the air

Automatic translation: Originally published in Finnish on March 13th, 2025 at 9:12 AM EET. Please note that the automatic translation currently only covers the text visible here and may contain errors. You can provide feedback on the translations here.

The cyclicality of demand for large-scale systems materialized in the second half of 2024, and revenue fell short of expectations. However, development was good in more recurring and higher-margin segments, such as on-board product sales and services. Signs of a turnaround are visible in the form of both a recovery in the order book and strategic progress. We see the valuation as favorable relative to the quality of the business and reiterate our Accumulate recommendation with a target price of EUR 6.2 (unchanged). 

Sales fell short of expectations at the end of the year, cash flow was strong

H2 figures were slightly softer than our estimates, mainly due to system sales suffering from a weak industrial cycle. H2 revenue was 27.9 MEUR (-11% y/y) and missed our estimate by 7%. Full-year 2024 revenue was 52.7 MEUR, slightly below the company's guidance (54-56 MEUR). The earnings lines were relatively stable and closer to expectations despite weak revenue. H2 EBITDA was 3.0 MEUR (H2’23: 3.4 MEUR) and adjusted operating profit (EBITA) was 2.2 MEUR (H2’23: 2.6 MEUR). The aforementioned earnings lines were 3-5% below our estimates. Earnings were supported by growth in segments with strong margins. Onboard scale sales grew by 9% as the company gained market share. Services saw slight growth of 2%, within which we estimate that the growth of SaaS revenue was more pronounced. Net income suffered from larger-than-expected financial and tax expenses, resulting in a reported EPS of EUR 0.00 (our estimate was EUR 0.06). Cash flow from operating activities developed strongly and net debt decreased to 6.7 MEUR (our estimate was 7.8 MEUR), which is partly related to the release of working capital. No dividend will be paid, and the company reports that it has continued preparations for new acquisitions.

Expected positive outlook for 2025

Tamtron guides for revenue exceeding 58 MEUR and EBITDA exceeding 6 MEUR in 2025. The guidance is in line with our estimates, which we raised by about 3% in the H2 preview, supported by the MEUR 3 system sale announced earlier in the year. We now forecast revenue of 58.8 MEUR (up 12%) and EBITDA of 6.6 MEUR. In the estimates, the revenue of the Industrial segment, which suffered badly in 2024, is recovering with the support of the strengthening order book. We expect the onboard segment to continue growing due to OEM partnerships, strengthening international distribution, and product launches. On the cost side, we have assumed a significant increase in personnel costs due to the strategic international growth target in system sales. Our depreciation assumptions increased as R&D investments exceeded our estimates, which led us to lower our adjusted EBIT estimates by 3% for 2025-26 compared to our latest research report (estimated EBITDA increased by 1-2%). 

The cycle bottom has been reached and the valuation is low

We believe that the outlook for rising earnings in 2025 is relatively good at this early stage of the year, thanks to the good development trend in the order book and predictable segments (onboard and services). At the current share price, the adjusted EV/EBIT for 2025 estimates is only 9x, which in our view appears to be an attractive level. We estimate a fair valuation level of approximately EV/EBIT 11x, which would correspond to a share price of EUR 6.4 with 2025 estimates. The fair valuation level is supported on the one hand by a good return on invested capital (adjusted ROI 2024-25e: 14-17%) and the significant share of service sales. On the other hand, we see the cyclicality of equipment sales and the moderate market growth rate as negative factors. Progress in the company's growth projects and, for example, further evidence of international success in SaaS and system sales could also open up visibility into the upward trend in earnings development over the longer term. We also consider acquisitions likely already during the current year, but we do not specifically incorporate them in the valuation.