Baumot Group AG - Upside potential and improved results

Only 10% of sales in Germany

In the first half of 2019, there were significant increases in sales. Revenues for the first half of 2019 were up 159.2% to EUR 7.78 million, compared to EUR 3.00 million in the previous year. This was mainly due to primarily foreign markets, which accounted for around 90% of sales. However, this distribution should increasingly shift back to the home market with the start of retrofitting in Germany.

Diversification through international markets

The Baumot Group AG was able to position itself very strongly in the Italian market and expects further stable sales in this market in the future. Furthermore, the market presence in the Near and Middle East, especially in Israel, was further expanded. This is done without own infrastructure via local partners in order to keep the geopolitical risks for the company low. Geographically, the UK also contributed substantial sales revenues through the retrofitting of city buses. In addition, agricultural machinery in Eastern Europe continued to be supplied with exhaust aftertreatment systems.

A positive EBITDA

Extensive process improvements and renegotiations in purchasing led to a strong improvement in earnings and the EBITDA was positive for the first time in four years. EBITDA of EUR 0.50 million was achieved, compared to EUR -2.77 million in the previous year. Due to this good operating development, a positive net result of almost EUR -0.22 million was achieved. In the same period last year, the net result was EUR -3.66 million. It is becoming apparent that a successful turnaround has been achieved and that further improvements in the course of the ongoing car retrofitting should be possible again.

GBC Research confirms rating

In the context of the more concrete guidance for 2020 and the achieved half-year results in 2019, the analysts of GBC Research have adjusted their forecast. If the second half of 2019 develops similarly to the first half, revenues of around EUR 15.5 million should be significantly below the guidance of EUR 22 million, but EBITDA of EUR 1 million should be in line with the EUR 1.1 million guidance. Originally, the GBC experts had expected revenues of EUR 30.33 million and EBITDA of EUR 3.29 million and an EBITDA margin of 10.8% in 2020.

Management believes that the reason for the single-digit EBITDA margin is higher start-up costs in the course of the car retrofit. By adjusting its forecast, GBC has reduced the price target from EUR 3.40 to EUR 3.13 on the basis of its DCF model, but still assigned a Buy rating.