Buybacks completed // expansionary fiscal policy to fuel growth

Share buyback completed. On November 11^th, INDUS announced a public tender offer to buy back 700,000 shares at a price of € 21.65 per share as well as an open market buyback program for up to 200,000 shares starting on December 2^nd. While the tender offer was already completed in November, the open market program was executed over the last months and ended successfully on March 4^th with an average price of € 21.20 for 200,000 shares in total. In addition, INDUS retired 1.1m treasury shares (4.1% of total shares), which were acquired in February 2024 to increase EPS and return cash to its shareholders. The recently acquired 0.9m shares (3.5% of the new number of shares) are still held as treasury shares and might be used for future M&A activities.

This is positive news in our opinion, as we already flagged in our update from January 10^th, INDUS is clearly showing improvements in their way they think about capital allocation, which is a crucial skill for every serial acquirer. Not only has INDUS acquired these shares below the current stock price (€ 24.50) but also below our estimated intrinsic value of € 34, thus offering attractive ROICs. Nevertheless, we would have liked INDUS to have acted more decisively and bought back the full authorized 10% of the outstanding shares.

Expansionary fiscal policy to fuel future growth. On March 4^th, election winner and prospective new Chancellor Friedrich Merz from the Christian Democrats (CDU) as well as the Bavarian Christian Social Union (CSU) and the Social Democrats (SPD) discussed a € 500bn special fund for infrastructure investments over the coming 10 years, next to a sizable fund for defense. It is planned to pass the law before the new government takes office. This could substantially support INDUS’ growth as c. 50% of its sales are from Germany and many of its holdings would be involved in infrastructure projects

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For instance, Betek (17% of sales) and Wirtgen, a subsidiary of John Deere control together c. 65% of the road milling market. As road milling picks last only for around 8 hours, customers are forced to promptly buy new tools as more roads are getting refurbished. Aurora (5% of sales), which provides HVAC systems for vehicles including buses, could benefit from investments in public transportation. Other companies such as Hauff-Technik (5% of sales), a provider of sealing systems for cables and pipes should benefit from new public buildings (hospitals, airports, universities). Although this list is by no means exhaustive, it gives an idea how INDUS’ companies are affected on a broad basis and that they can profit significantly not only from infrastructure investments directly but also from the aftereffects for the German economy as a whole.

We continue to like the stock and confirm INDUS as one of NuWays’ Alpha Picks. Reiterate BUY with an unchanged PT of € 34 based on FCFY’24e.