Aging Population, Digitalization And Energy Transition Will Secure Enduring Strength

Key Takeaways

• Friedrich Vorwerk and DTS are driving strong growth, margin expansion, and recurring revenues, likely leading to better-than-expected results and guidance outperformance.
  
• Aumann's diversification and cost controls position it for margin recovery, while MBB's strong balance sheet enables accretive expansion in high-growth sectors.
  
• Persistent headwinds across core markets, demographic shifts, and rising competition threaten revenue growth, profitability, and long-term financial resilience.

Catalysts

Engages in the acquisition and management of medium-sized companies primarily in the technology and engineering sectors in Germany and internationally.

• Analysts broadly agree that stable top-line growth in 2025 will be underpinned by Friedrich Vorwerk and DTS, but this view may be overly conservative given the exceptional Q1 results-with over 70 percent growth at Friedrich Vorwerk and strong software-driven margin expansion at DTS-suggesting that full-year revenues and EBITDA margins could significantly exceed guidance, especially as major high-value infrastructure projects ramp up.
  
• While the consensus sees Aumann as a drag due to a soft automotive cycle, this may understate Aumann's resilience and diversification efforts, as there are early signs of order intake stabilization, proactive cost management driving improved margins, and meaningful exposure to automation, aviation, and life sciences-all positioning Aumann to outperform expectations and support group-level margin recovery.
  
• The structural trend toward mission-critical infrastructure-especially in energy transition (electricity, gas, hydrogen)-is accelerating major project wins at Friedrich Vorwerk, driving recurring, high-visibility revenues and sustainably higher EBITDA contributions over multiple years.
  
• As digitalization and security spend intensifies and investment platforms proliferate, DTS stands to access a broader enterprise and public sector client base, fueling faster-than-expected software and IT services growth, which should enhance margins and deliver robust recurring revenue streams.
  
• MBB's rock-solid balance sheet with nearly half a billion euros in net cash and a disciplined, long-term capital allocation approach enables opportunistic expansion, including M&A across high-growth industrial and tech niches, which could be highly accretive to future earnings and materially boost net asset value per share.

MBB Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on MBB compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming MBB's revenue will grow by 4.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 3.3% today to 2.8% in 3 years time.
• The bullish analysts expect earnings to reach €36.0 million (and earnings per share of €7.83) by about July 2028, down from €37.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 40.1x on those 2028 earnings, up from 24.9x today. This future PE is greater than the current PE for the GB Industrials industry at 22.5x.
• Analysts expect the number of shares outstanding to grow by 0.86% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.39%, as per the Simply Wall St company report.

MBB Future Earnings Per Share Growth

Risks

• Weaker demand in the Technological Applications and Consumer Goods segments, as well as continued volatility in the automotive and furniture markets, could lead to sustained pressure on revenue growth and lower net margins if cyclical and structural decline in these areas persist.
  
• Aging population trends and affordability issues impacting homeownership in key markets may reduce long-term demand for MBB's services and acquisitions, limiting organic growth opportunities and negatively impacting both revenues and future earnings potential.
  
• Increased competition from digital platforms and fintech innovations in areas like IT security and financial services could erode the market position of subsidiaries such as DTS, ultimately putting pressure on MBB's consolidated revenues and profitability over time.
  
• The ongoing reliance on favorable macroeconomic conditions, such as mild weather for Friedrich Vorwerk and strong public infrastructure spending, introduces the risk of cyclical downturns or policy shifts that could reduce order intake and dampen the company's revenue and EBITDA margins across key segments.
  
• A shift in investor preference toward alternative or higher yield assets, combined with possible structural imbalances in the industries MBB serves, could lead to reduced asset inflows, diminished liquidity, and weaker earnings growth, challenging the long-term strength of the company's financial performance.

Valuation

• The assumed bullish price target for MBB is €246.5, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of MBB's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €246.5, and the most bearish reporting a price target of just €171.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €1.3 billion, earnings will come to €36.0 million, and it would be trading on a PE ratio of 40.1x, assuming you use a discount rate of 5.4%.
  
• Given the current share price of €171.6, the bullish analyst price target of €246.5 is 30.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.