Solid H1 despite a tough market environment

Yesterday, 123f released preliminary H1'26 figures, which we regard as a solid print given the ongoing demand vacuum ahead of the driving school reform. In detail:

H1 group sales increased slightly to € 13.0m (H1'25: € 12.9m; eNuW: € 13.5m), slightly below estimates but nonetheless standing out against a market in which numerous peers are reporting declining volumes as prospective learners continue to postpone enrollment ahead of the reform taking effect on 1 January 2027. Reported EBITDA came in at c. € 0.85m, burdened by planned growth investments, while adj. EBITDA improved 12% yoy to c. € 1.1m (H1'25: € 1.0m; eNuW: € 1.0m), confirming the underlying operating leverage of the model.

Core business improves profitability in a soft market. Sales and EBITDA in the core driving school segment increased yoy, validating the operational clean-up and efficiency measures taken and in FY25. The transformation towards a structurally leaner setup is progressing well. With a full transition of theory lessons to e-learning, roughly half of the existing lease contracts have already been terminated, improving scalability with a lasting margin tailwind into FY27e.

Foerst with high H2 visibility. The simulator subsidiary saw a slightly weaker H1 against a tough comparison base. Yet, based on the current order backlog, management expects a significantly stronger H2. Notably, the legal recognition of simulators for mandatory training components from 1 January 2027 is already triggering a tangible pick-up in demand, as driving schools front-load investments ahead of the new regulatory framework. This is in line with the pull-forward dynamics we outlined in our previous update following the publication of the draft legislation.

FahrerWerk enters asset-light expansion mode. The subsidiary signed its first cooperation partner, adding five locations (Hamburg, Hannover, Erfurt, Halle/Leipzig, Mörfelden-Walldorf). FahrerWerk provides brand, training concept and digital infrastructure while the partner carries local operations and site infrastructure, allowing the network to scale without meaningful own investments. While the H1 contribution remained muted due to long course durations and lead times in participant acquisition and funding processes, a noticeable pick-up in utilisation and registrations should become visible in H2. Management hence reiterated its long-term target of a nationwide network of 650+ locations and c. 1,200 instructors by 2029, implying a market share of c. 10%.

FY26 guidance confirmed. Management reiterated its FY26 EBITDA guidance of € 1.5-2.5m (eNuW: € 1.9m), which looks achievable given the operational tailwinds described as well as the solid H1. Looking at our FY26e sales estimate of € 29.1m, the achievability of the implied H2 sales of c. € 16m will largely depend on the timing of Foerst deliveries and FahrerWerk acceleration.

Overall, the release confirms the the equity story as the company is successfully bridging the pre-reform demand trough while building the infrastructure to capture the post-reform acceleration. To break it down, 123f looks set to become a main beneficiary of the upcoming reform, which should translate into meaningful market share gains.

Reiterate BUY with an unchanged PT of € 6.10 based on DCF.