Focusing On Energy Transition And Cybersecurity Aligns With Global Trends And Will Secure Future Success

Key Takeaways

• MBB's investments in subsidiaries and order backlogs foster potential acquisitions and internal growth, enhancing overall earnings.
  
• Focus on sustainable business models and long-term growth strategies aligns with global trends, potentially boosting revenue and net margins.
  
• Concentration on traditional carmakers and mixed demand across segments increase vulnerability and limit financial flexibility, reflecting investor skepticism and uncertain market conditions.

Catalysts

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

• Friedrich Vorwerk's strong focus on energy infrastructure for the energy transition, including electricity, gas, and hydrogen sectors, positions it for continued growth in revenue and improved EBITDA margins, with future projects tied to German energy infrastructure developments.
  
• Regulatory pushes in the EU to invest in cybersecurity are expected to drive future revenue and margin improvements for DTS as it benefits from increased demand in the cybersecurity sector.
  
• Aumann's strategic shift to expand its automation solutions beyond e-mobility into sectors like aerospace and life sciences could diversify revenue streams and stabilize margins amidst fluctuating automotive demands.
  
• MBB's continuous investment in its subsidiaries, coupled with significant order backlogs and strong cash positions, supports potential acquisitions and internal growth, likely enhancing overall earnings growth.
  
• MBB's focus on sustainable business models and long-term growth strategies aligns with increasing global sustainability trends, poised to elevate revenue and net margins over time.

MBB Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming MBB's revenue will grow by 6.1% annually over the next 3 years.
• Analysts are assuming MBB's profit margins will remain the same at 2.6% over the next 3 years.
• Analysts expect earnings to reach €32.4 million (and earnings per share of €5.77) by about January 2028, up from €26.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €36.2 million in earnings, and the most bearish expecting €25.8 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.5x on those 2028 earnings, up from 20.2x today. This future PE is greater than the current PE for the GB Industrials industry at 19.7x.
• Analysts expect the number of shares outstanding to grow by 1.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.92%, as per the Simply Wall St company report.

MBB Future Earnings Per Share Growth

Risks

• The temporary delay of e-mobility orders by European OEMs creates uncertainty about future demand, potentially affecting Aumann's revenues and profits.
  
• Delignit's lower-than-expected demand from automotive OEMs, especially in the Caravan business, has significantly impacted its revenues and profitability.
  
• The Consumer Goods segment has faced mixed results, with CT Formpolster experiencing low demand and Hanke Tissue experiencing only moderate revenue growth, which could strain future earnings.
  
• The company's focus on existing markets, particularly its reliance on traditional carmakers, introduces concentration risk and potential vulnerability to shifts in these markets, impacting revenue diversification.
  
• The holding company's share discount and market under-valuation reflect investor skepticism, potentially limiting capital raises and affecting financial flexibility.

Valuation

• The analysts have a consensus price target of €126.33 for MBB based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.3 billion, earnings will come to €32.4 million, and it would be trading on a PE ratio of 22.5x, assuming you use a discount rate of 4.9%.
  
• Given the current share price of €100.0, the analyst's price target of €126.33 is 20.8% 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.