Oddo BHF maintains its 'outperform' rating on Worldline shares, with a drastically reduced target price, from 45 to 20 euros, after the stock lost nearly 60% of its value during the October 25 trading session.

While the analyst considers this warning to be "very significant", particularly in terms of FCF (-30/60% on FCF 23/24), he believes that "it is above all the Group's communication that was punished yesterday".

Oddo BHF believes that the accumulation of several issues (macro slowdown in Germany, quality of e-tailers) and the decision to proceed at the same time with a restructuring program (250 ME) have created confusion and fed the idea that Worldline could be suffering from more structural problems.

Yesterday, following the publication of lower-than-expected sales, Worldline revised its 2023 guidance, now anticipating organic sales growth of 6/7% (vs. 8/10%), which implies growth of ~3% in Q4. In addition, the OMDA margin has been revised down by 150 bp (vs >+100 bp previously).

The broker points to three key issues, namely the macro slowdown in Germany, the new restructuring plan and the termination of contracts by certain retailers.

Oddo BHF's view is that an extremely gloomy scenario seems 'predicated'.

To justify the current price in our DCF (WACC of 13%), we would therefore need a very pessimistic (and not very credible) financial scenario of a 3% decline in annual sales, operating margins down by 100 bp a year, a cash generation profile well below that of the past, and a zero long-term growth rate", concludes the broker.

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