Mixed Q3, FY guidance lowered but prospect remain attractive

Q3 revenue fell 5.5% yoy to € 22.4m on the back of weak Adhesives business (-14.6% yoy to € 7.8m; Q1-3: -10.5% yoy to € 24.9m) as the unit struggled with persistent weakness in the automotive sector and shifting Asian electronics supply chains, which drove notable sales declines, delayed new projects, and slowed development momentum.

Positively, Curing showed further stabilization with sales down only 0.6% yoy to € 8.7m (Q1-3: -1.3% yoy) while Disinfection remained on a modest growth path (Q3: +1.7% yoy to € 6.1m; Q1-3: +5.5% yoy). This reflects restructuring measures in Curing, including a focus on core competencies, discontinuation of unprofitable product lines such as solar simulation (~ € 2m sales p.a.), and cost reductions, while Disinfection benefited from higher UV lamp and component sales, especially for ballast water systems.

EBITDA for the quarter came in at € 0.5m, down from € 1.4m last year (margin -3.4pp yoy to 2.3%). The decline mainly reflects soft order intake, and underutilization in parts of the business. This was particularly visible within Adhesives, which recorded a 7.9pp margin decline to 6.9%. With higher sales, the Disinfection margin climbed to 10.8% (+4.4pp yoy).

Net financial debt decreased further to € 42.7m (vs. € 46m at the end of Q3 2023/24) thanks to a solid operating cash flow (Q1-3: € 3.7m) on the back of reduced working capital but also the sale of a non-core property (€ 1.3m proceeds). Worth highlighting, the majority of the financial debt (eNuW: € 30m running until mid 2038) is related to investments and loans for the group’s corporate buildings.

New FY24/25 guidance. Early last week, management already cut its guidance to now € 92-94m sales (old: € 95-105m) and EBITDA of € 5-6m (old: significantly higher than the adj. EBITDA of the previous year of € 5.5m) as a result of the above described cautiousness across key end markets but also FX headwinds.

Prospects remain promising. As outlined during the CMD at the beginning of the year, Hönle targets € 175m sales and a 20-25% EBITDA margin by 2030 carried by the already ongoing strategic transformation, visible in the divestment of the unprofitable sun simulation business, reduced SG&A and more importantly new solutions gaining traction (e.g. first € 250-300k sales of UV disinfection for ultra-pure water). For the time being, we remain more cautious (eNuW: € 137m sales, 6% CAGR 2024/23-2029/30e with 15% EBITDA margin)  

BUY with a € 16 PT based on DCF.