Exel Composites Q4'24: Revving up the engine this year

Translation: Original published in Finnish on 2/17/2025 at 8:00 am EET.

Exel's operational development in Q4 was broadly in line with our expectations, as the company's result improved from a weak comparison period, albeit still at a low level. However, order intake showed a positive trend, but the company remained cautious in its market commentary. We estimate that the guidance for the current year was in line with our previous expectations, and reflecting this, the changes to our projections were quite limited. In view of this and the current neutral valuation of the stock, we reiterate our target price of EUR 0.35 for Exel and our Reduce recommendation. 

Development broadly in line with our expectations

In Q4, the company's net sales grew 14% year-on-year to 25.1 MEUR, up from a rather sluggish comparison period and well in line with our expectations. Positive developments were seen in several customer industries, but it is also important to note the weak comparison figures. Exel's adjusted EBIT was 0.2 MEUR, which was slightly below our forecast. As expected, the reported result was also negatively impacted by one-off costs of 4.2 MEUR related to the closure of the Belgian factory. At the bottom of the income statement, however, net financing costs were positive, contrary to our expectations, which we believe was mainly influenced by non-cash FX movements on intercompany loans. Against this backdrop, reported EPS turned out to be slightly less negative than we had estimated. On the other hand, Q4 order intake (29 MEUR) increased nicely from both the comparison period and the previous quarters, but the company was still cautious in its market commentary due to the repeatedly fluctuating sentiment in recent years. 

Minor estimate changes

With the release of the financial statements, Exel provided guidance for the current year and expects its revenue to increase from last year (2024: 100 MEUR) and its adjusted EBIT to increase significantly compared to last year (2024: 1.7 MEUR). The company commented that fragile macroeconomic sentiment and uncertainties continue to affect customer behavior in all of its geographic regions. According to the company, in the short term, the development of revenue and profitability may also be affected by the strikes announced in Finland and the measures related to the transfer of production from the Belgian factory. As a whole, we estimate that the market outlook has remained relatively stable and that a more pronounced upturn will have to wait at least until later in the year. With this in mind, we continue to expect Exel's growth to accelerate more clearly only next year, driven by larger wind power contracts. Similarly, we consider the current year's guidance to be in line with our previous expectations, which is reflected in only minor revisions to our forecasts for the coming years. In line with the uptrend in order intake, we slightly raised our growth forecasts for the current year and expect the company's revenue to reach 105 MEUR this year (previously 103 MEUR). Similarly, we expect the company's profitability to be supported by a slight increase in revenue, implemented cost savings and gradual efficiency improvements. We estimate that the adjusted EBIT will amount to 4.5 MEUR (previously 4.3 MEUR). 

Relatively neutral overall valuation picture

The overall valuation picture for the stock this year is challenging (2025e: P/E 20x, EV/EBIT 13x, EV/EBITDA 6x) compared to our acceptable valuation range (P/E 10x-14x, EV/EBIT 8x-12x, EV/EBITDA 5x-8x). For the time being, we see the acceptable valuation remaining towards the lower end of the range, given the still unproven earnings turnaround and the volatile performance in recent years. Meanwhile, forecast risks are elevated due to uncertainty about the timing of the market turnaround and a lack of concrete signs. Our estimate on the neutral valuation of the stock is also supported by our DCF model, which stands at EUR 0.38 per share.