Proact: Data storage starting to see some AI demand - ABG

Tough comps in Q4e but tailwinds into 2024e
Cost reductions to yield margin expansion ahead
Share at 7.1x 2024e EV/EBITA, -37% vs. IT re-seller peers


System sales are volatile and face tough comps in Q4e

As usual, system sales (55% of sales) are volatile by nature, and we expect that pattern to continue. In Q4e, we forecast -25% organic growth y-o-y, as system sales grew 65% in Q4'22. As this has a lower margin than service sales (45% of sales), the effect on earnings is less. We therefore estimate Q4e to deliver -17% group sales organic growth, while adj. EBITA is down -13% y-o-y, helped by cost reductions made during 2023. Although the IT services market has weakened during 2023, and that service sales have correlated relatively well with systems sales over time, we have seen a resilient development with 6-9% organic growth during Q1-Q3'23, which is positive and could surprise positively again in Q4e where we estimate -3%, driven by the decline in system sales. We leave our underlying estimates unchanged but update for FX and cut sales and adj. EBITA by 1% in 2023-25e.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/proact/Equity-research/2024/1/proact---data-storage-starting-to-see-some-ai-demand/