Eckert & Ziegler Strahlen und Medizintechnik : Hauck & Aufhäuser

Eckert & Ziegler AG

Germany - High-tech Engineering

	Buy (old: Buy)					09-November-22
	Price target: EUR 120.00 (old: EUR 120.00)			Alexander Galitsa
						Analyst
	Price:	EUR 41.38	Next result:	Q4 30.03.23
	Bloomberg:	EUZ GR	Market cap:	EUR 856.4 m		[e-mail]
		Tel.: [phone]
	Reuters:	EUZG.DE	Enterprise Value:	EUR 797.6 m

Sound Q3 render the FY guidance overly conservative

EUZ delivered sound Q3 with sales up 38% yoy to € 57m (or ~22% adj for M&A and fx) and an EBIT of € 13.5m, corresponding to 23.6% margin.

While both divisions contributed to the strong growth performance, the growth re- acceleration in the Medical division (+18% yoy; H1 2022: 3% yoy), on the back of radiopharmaceutical isotopes, is particularly encouraging. At the same time, Isotope Products (+25% yoy adj. for M&A and fx) continued to benefit from the oil and gas- related demand, partially gaining market share from sanctioned Russian suppliers, as well as strong demand for quality assurance products for PET cameras, benefitting from an increasing prevalence of radio-imaging.

Q3 earnings look "clean" with no major non-operating effects. While currency gain contributed € 1.7m, the at-equitywrite down in Russian-basedassociated companies posed a € 0.9m headwind.

Q3 FCF was better-than-expected at € 6.4m due to an overall moderating pace of investments into PPE. In fact, the major phase of capacity expansion is finalized, while CAPEX for the Chinese plant will be stretched over a longer timeframe, not least due to COVID. In 2023, Pentixa Ph3 clinical trial should represent the bulk of the total CAPEX.

Despite having achieved 82% and 86% of the FY sales and net income targets respectively, management decided not to raise the guidance just yet citing "the current tense and risky global economic situation". This allows for a significant "margin of safety" and we expect to see a guidance increase in the course of Q4.

Our FY sales and net income estimates are 12% and 15% ahead of the guidance,

implying 10% yoy sales growth (adj for M&A and fx) in Q4, still allowing for a slowdown relative to Q3, and an EPS of € 0.38, compared to € 0.41 and € 0.40 in Q2 and Q3 2022.

Action: Estimate changes reflect stronger than expected sales, partly due to fx, stronger profitability amid a favorable sales mix and lower D&A amid trimmed CAPEX.

All in all, Q3 results confirm our view that EUZ is a highly profitable, and growing business supplying mission-critical isotope technology (incl. raw isotopes) to industrial and pharmaceutical companies. The latter especially represents an attractive long-termgrowth opportunity, which is not being adequately reflected in the current share price (see update dated 9th August for details). BUY with an unchanged PT of € 120

Y/E 31.12 (EUR m)	2018	2019	2020	2021	2022E	2023E	2024E
Sales	168.7	178.5	176.1	180.4	224.5	238.5	263.5
Sales growth	22 %	6 %	-1 %	2 %	24 %	6 %	10 %
EBITDA	32.0	43.1	44.8	57.0	60.9	63.8	73.7
EBIT	23.4	32.1	33.7	47.4	50.2	51.9	60.9
Net income	16.1	22.0	22.9	34.4	31.3	35.5	41.8
Net debt	-54.1	-78.9	-88.6	-86.6	-71.8	-70.2	-74.2
Net gearing	-44.1 %	-57.1 % -59.9 %	-46.2 % -34.6 %	-30.4 % -28.4 %
Net Debt/EBITDA	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EPS pro forma	3.12	1.06	1.04	1.67	1.51	1.71	2.02
CPS	0.64	1.46	1.28	1.20	1.09	1.55	1.68
DPS	1.20	0.35	0.35	0.56	0.50	0.50	0.50
Dividend yield	3.1 %	0.9 %	0.9 %	1.5 %	1.3 %	1.3 %	1.3 %
Gross profit margin	44.1 %	48.8 %	49.1 %	50.5 %	50.8 %	51.2 %	52.2 %
EBITDA margin	18.9 %	24.2 %	25.4 %	31.6 %	27.1 %	26.8 %	28.0 %
EBIT margin	13.9 %	18.0 %	19.1 %	26.3 %	22.4 %	21.7 %	23.1 %
ROCE	17.6 %	22.5 %	22.9 %	26.0 %	18.9 %	15.8 %	17.1 %
EV/sales	1.1	3.1	4.2	10.1	3.6	3.4	3.0
EV/EBITDA	5.5	13.0	16.7	32.0	13.1	12.5	10.8
EV/EBIT	7.6	17.5	22.2	38.5	15.9	15.4	13.1
PER	10.5	25.5	34.9	52.7	25.0	24.1	20.5
Adjusted FCF yield	9.8 %	4.2 %	3.3 %	2.0 %	4.4 %	4.8 %	5.7 %

Source: Company data, Hauck Aufhäuser Investment Banking Close price as of: 08.11.2022

Please refer to important disclosures at the end of the report

Source: Company data, Hauck Aufhäuser Investment Banking

High/low 52 weeks:	113.90 / 30.66
Price/Book Ratio:	3.8
Relative performance (SDAX):
3 months			-1.3 %
6 months			1.9 %
12 months		-37.7 %
Changes in estimates
		Sales	EBIT	EPS
2022	old:	215.0	46.6	1.47
∆	4.4%	7.7%	2.5%
2023	old:	229.0	44.9	1.48
∆	4.1%	15.5%	15.5%
2024	old:	258.0	54.7	1.81
∆	2.1%	11.4%	11.4%
Key share data:
Number of shares: (in m pcs)	20.7
Authorised capital: (in € m)	0.6
Book value per share: (in €)	10.0
Ø trading volume: (12 months)	20,453
Major shareholders:
Free float					67.8 %
Founders					32.2 %
Eckert & Ziegler AG			0.1 %

Company description:

A full-service provider for

radiopharmaceuticals and isotope technology for industrial applications

Eckert & Ziegler AG

EUR	Q3 2022	Q3 2022	Q3 2021	yoy	9M 2022	9M 2021	yoy
est
Sales	57 .2	53 .0	41.5	37.7%	164 .0	131.0	25.2%
EB IT	13 .5	11.8	10 .9	24.2%	37 .9	31.3	21.0%
EBIT margin	23.6%	22.3%	26.2%	- 2.6 pp	23.1%	23.9%	- 0.8 pp
thereof at equity	-0.9		2.1		-1.0	1.8
thereof other fin results (e.g. fx gains/losses)	1.7		0.4		3.5	0.8
EBIT margin adj for at equity and other fin result	22.2%		20.3%	+1.9 pp	21.6%	22.0%	- 0.4 pp
Source: Company data; HAIB

2	Hauck Aufhäuser Investment Banking

Eckert & Ziegler AG

Financials

Profit and loss (EUR m)	2018	2019	2020	2021	2022E	2023E	2024E
Sales	168.7	178.5	176.1	180.4	224.5	238.5	263.5
Sales growth	21.7 %	5.8 %	-1.3 %	2.4 %	24.4 %	6.2 %	10.5 %
Cost of sales	94.4	91.5	89.6	89.4	110.4	116.3	126.0
Gross profit	74.3	87.0	86.5	91.1	114.1	122.2	137.5
Sales and marketing	23.3	22.9	21.7	22.6	27.1	28.7	30.1
General and administration	26.9	27.6	28.1	31.5	34.8	36.8	38.5
Research and development	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Other operating income	3.5	2.8	5.8	17.7	6.6	2.6	-0.4
Other operating expenses	4.5	7.1	7.2	7.3	8.6	7.4	7.6
Unusual or infrequent items	0.2	-0.2	-1.6	0.0	0.0	0.0	0.0
EBITDA	32.0	43.1	44.8	57.0	60.9	63.8	73.7
Depreciation	8.6	11.1	11.1	9.6	10.7	12.0	12.8
EBITA	23.4	32.1	33.7	47.4	50.2	51.9	60.9
Amortisation of goodwill	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Amortisation of intangible assets	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Impairment charges	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EBIT (inc revaluation net)	23.4	32.1	33.7	47.4	50.2	51.9	60.9
Interest income	0.2	0.3	0.2	0.1	0.0	0.0	0.0
Interest expenses	0.7	1.1	1.2	1.2	2.1	1.2	1.2
Other financial result	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Financial result	-0.5	-0.8	-0.9	-1.1	-2.1	-1.2	-1.2
Recurring pretax income from continuing operations	22.9	31.2	32.7	46.4	48.1	50.7	59.7
Extraordinary income/loss	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Earnings before taxes	22.9	31.2	32.7	46.4	48.1	50.7	59.7
Taxes	6.0	8.8	9.6	11.7	16.8	15.2	17.9
Net income from continuing operations	16.9	22.5	23.1	34.7	31.3	35.5	41.8
Result from discontinued operations (net of tax)	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net income	16.9	22.5	23.1	34.7	31.3	35.5	41.8
Minority interest	0.8	0.5	0.2	0.2	0.0	0.0	0.0
Net profit (reported)	16.1	22.0	22.9	34.4	31.3	35.5	41.8
Average number of shares	20.5	20.5	20.6	20.6	20.7	20.7	20.7
EPS reported	0.79	1.07	1.11	1.67	1.51	1.71	2.02
Profit and loss (common size)	2018	2019	2020	2021	2022E	2023E	2024E
Sales	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %
Cost of sales	55.9 %	51.2 %	50.9 %	49.5 %	49.2 %	48.8 %	47.8 %
Gross profit	44.1 %	48.8 %	49.1 %	50.5 %	50.8 %	51.2 %	52.2 %
Sales and marketing	13.8 %	12.8 %	12.3 %	12.5 %	12.1 %	12.0 %	11.4 %
General and administration	15.9 %	15.4 %	15.9 %	17.4 %	15.5 %	15.4 %	14.6 %
Research and development	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Other operating income	2.1 %	1.6 %	3.3 %	9.8 %	2.9 %	1.1 %	neg.
Other operating expenses	2.6 %	4.0 %	4.1 %	4.0 %	3.8 %	3.1 %	2.9 %
Unusual or infrequent items	0.1 %	neg.	neg.	0.0 %	0.0 %	0.0 %	0.0 %
EBITDA	18.9 %	24.2 %	25.4 %	31.6 %	27.1 %	26.8 %	28.0 %
Depreciation	5.1 %	6.2 %	6.3 %	5.3 %	4.7 %	5.0 %	4.9 %
EBITA	13.9 %	18.0 %	19.1 %	26.3 %	22.4 %	21.7 %	23.1 %
Amortisation of goodwill	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Amortisation of intangible assets	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Impairment charges	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
EBIT (inc revaluation net)	13.9 %	18.0 %	19.1 %	26.3 %	22.4 %	21.7 %	23.1 %
Interest income	0.1 %	0.2 %	0.1 %	0.1 %	0.0 %	0.0 %	0.0 %
Interest expenses	0.4 %	0.6 %	0.7 %	0.7 %	0.9 %	0.5 %	0.5 %
Other financial result	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Financial result	neg.	neg.	neg.	neg.	neg.	neg.	neg.
Recurring pretax income from continuing operations	13.6 %	17.5 %	18.6 %	25.7 %	21.4 %	21.2 %	22.7 %
Extraordinary income/loss	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Earnings before taxes	13.6 %	17.5 %	18.6 %	25.7 %	21.4 %	21.2 %	22.7 %
Tax rate	26.2 %	28.1 %	29.4 %	25.3 %	35.0 %	30.0 %	30.0 %
Net income from continuing operations	10.0 %	12.6 %	13.1 %	19.2 %	13.9 %	14.9 %	15.9 %
Result from discontinued operations (net of tax)	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Net income	10.0 %	12.6 %	13.1 %	19.2 %	13.9 %	14.9 %	15.9 %
Minority interest	0.4 %	0.3 %	0.1 %	0.1 %	0.0 %	0.0 %	0.0 %
Net profit (reported)	9.6 %	12.3 %	13.0 %	19.1 %	13.9 %	14.9 %	15.9 %

Source: Company data, Hauck Aufhäuser Investment Banking

3	Hauck Aufhäuser Investment Banking

Eckert & Ziegler AG

Balance sheet (EUR m)	2018	2019	2020	2021	2022E	2023E	2024E
Intangible assets	52.5	51.9	41.4	61.4	76.1	96.1	116.1
Property, plant and equipment	36.9	40.0	38.0	61.9	71.9	74.0	73.1
Financial assets	3.5	5.2	8.0	16.4	16.4	16.4	16.4
FIXED ASSETS	93.0	97.1	87.4	139.7	164.4	186.5	205.6
Inventories	28.8	31.2	33.6	37.4	43.2	45.9	50.7
Accounts receivable	28.3	29.5	28.2	31.9	36.9	39.2	43.3
Other current assets	14.9	26.6	42.3	34.0	34.0	34.0	34.0
Liquid assets	54.2	78.9	88.6	93.7	78.9	77.3	81.3
Deferred taxes	9.9	10.9	11.9	11.2	0.0	0.0	0.0
Deferred charges and prepaid expenses	0.0	0.0	0.0	0.0	0.0	0.0	0.0
CURRENT ASSETS	136.1	177.1	204.6	208.1	193.0	196.4	209.3
TOTAL ASSETS	229.1	274.2	292.0	347.7	357.4	382.9	414.9
SHAREHOLDERS EQUITY	122.6	138.2	147.8	187.4	207.7	231.1	260.7
MINORITY INTEREST	1.2	1.2	1.1	5.1	0.0	0.0	0.0
Long-term debt	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Provisions for pensions and similar obligations	11.4	13.5	14.4	13.0	13.0	13.0	13.0
Other provisions	55.1	66.4	70.5	92.5	88.1	89.8	91.6
Non-current liabilities	66.5	79.9	84.9	105.5	101.1	102.9	104.7
short-term liabilities to banks	0.0	0.0	0.0	7.1	7.1	7.1	7.1
Accounts payable	6.5	4.5	5.0	5.6	6.7	7.0	7.6
Advance payments received on orders	4.1	12.0	8.6	11.6	11.6	11.6	11.6
Other liabilities (incl. from lease and rental contracts)	17.4	35.6	42.3	23.1	23.1	23.1	23.1
Deferred taxes	7.1	2.8	2.2	2.2	0.0	0.0	0.0
Deferred income	3.6	0.0	0.0	0.0	0.0	0.0	0.0
Current liabilities	38.8	54.9	58.2	49.7	48.5	48.9	49.4
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	229.1	274.2	292.0	347.7	357.4	382.9	414.9
Balance sheet (common size)	2018	2019	2020	2021	2022E	2023E	2024E
Intangible assets	22.9 %	18.9 %	14.2 %	17.7 %	21.3 %	25.1 %	28.0 %
Property, plant and equipment	16.1 %	14.6 %	13.0 %	17.8 %	20.1 %	19.3 %	17.6 %
Financial assets	1.5 %	1.9 %	2.7 %	4.7 %	4.6 %	4.3 %	3.9 %
FIXED ASSETS	40.6 %	35.4 %	29.9 %	40.2 %	46.0 %	48.7 %	49.6 %
Inventories	12.6 %	11.4 %	11.5 %	10.7 %	12.1 %	12.0 %	12.2 %
Accounts receivable	12.4 %	10.8 %	9.7 %	9.2 %	10.3 %	10.2 %	10.4 %
Other current assets	6.5 %	9.7 %	14.5 %	9.8 %	9.5 %	8.9 %	8.2 %
Liquid assets	23.7 %	28.8 %	30.3 %	26.9 %	22.1 %	20.2 %	19.6 %
Deferred taxes	4.3 %	4.0 %	4.1 %	3.2 %	0.0 %	0.0 %	0.0 %
Deferred charges and prepaid expenses	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
CURRENT ASSETS	59.4 %	64.6 %	70.1 %	59.8 %	54.0 %	51.3 %	50.4 %
TOTAL ASSETS	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %
SHAREHOLDERS EQUITY	53.5 %	50.4 %	50.6 %	53.9 %	58.1 %	60.4 %	62.8 %
MINORITY INTEREST	0.5 %	0.5 %	0.4 %	1.5 %	0.0 %	0.0 %	0.0 %
Long-term debt	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Provisions for pensions and similar obligations	5.0 %	4.9 %	4.9 %	3.8 %	3.6 %	3.4 %	3.1 %
Other provisions	24.0 %	24.2 %	24.1 %	26.6 %	24.6 %	23.5 %	22.1 %
Non-current liabilities	29.0 %	29.1 %	29.1 %	30.4 %	28.3 %	26.9 %	25.2 %
short-term liabilities to banks	0.0 %	0.0 %	0.0 %	2.0 %	2.0 %	1.8 %	1.7 %
Accounts payable	2.8 %	1.6 %	1.7 %	1.6 %	1.9 %	1.8 %	1.8 %
Advance payments received on orders	1.8 %	4.4 %	3.0 %	3.3 %	3.3 %	3.0 %	2.8 %
Other liabilities (incl. from lease and rental contracts)	7.6 %	13.0 %	14.5 %	6.7 %	6.5 %	6.0 %	5.6 %
Deferred taxes	3.1 %	1.0 %	0.8 %	0.6 %	0.0 %	0.0 %	0.0 %
Deferred income	1.6 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Current liabilities	16.9 %	20.0 %	19.9 %	14.3 %	13.6 %	12.8 %	11.9 %
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %

Source: Company data, Hauck Aufhäuser Investment Banking

4	Hauck Aufhäuser Investment Banking

Eckert & Ziegler AG

Cash flow statement (EUR m)	2018	2019	2020	2021	2022E	2023E	2024E
Net profit/loss	16.9	22.5	23.1	34.7	31.3	35.5	41.8
Depreciation of fixed assets (incl. leases)	8.6	11.1	11.1	9.6	10.7	12.0	12.8
Amortisation of goodwill	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Amortisation of intangible assets	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Others	2.8	10.6	4.3	-1.1	0.0	0.0	0.0
Cash flow from operations before changes in w/c	28.2	44.1	38.5	43.1	41.9	47.4	54.6
Increase/decrease in inventory	0.7	-2.2	-2.4	-6.0	-5.8	-2.7	-4.8
Increase/decrease in accounts receivable	-4.0	-1.2	0.1	-3.9	-5.0	-2.3	-4.1
Increase/decrease in accounts payable	2.0	-0.4	0.5	0.6	1.1	0.4	0.6
Increase/decrease in other working capital positions	-5.7	0.0	0.0	0.0	0.0	0.0	0.0
Increase/decrease in working capital	-7.0	-3.7	-1.7	-9.3	-9.8	-4.6	-8.3
Cash flow from operating activities	21.2	40.4	36.8	33.9	32.2	42.8	46.3
CAPEX	6.1	7.3	8.9	28.9	35.4	34.0	32.0
Payments for acquisitions	2.1	0.9	0.0	8.3	0.0	0.0	0.0
Financial investments	0.0	0.0	5.4	0.0	0.0	0.0	0.0
Income from asset disposals	-2.5	2.5	0.9	13.5	0.0	0.0	0.0
Cash flow from investing activities	-10.7	-5.7	-13.3	-23.6	-35.4	-34.0	-32.0
Cash flow before financing	10.5	34.7	23.4	10.3	-3.3	8.8	14.3
Increase/decrease in debt position	-1.7	-2.7	-3.0	7.1	0.0	0.0	0.0
Purchase of own shares	8.6	0.0	0.0	0.0	0.0	0.0	0.0
Capital measures	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Dividends paid	4.1	6.2	8.8	9.3	11.5	10.3	10.3
Others	-0.2	-1.7	-1.2	-3.8	0.0	0.0	0.0
Effects of exchange rate changes on cash	0.6	0.5	-1.9	2.0	0.0	0.0	0.0
Cash flow from financing activities	-14.6	-10.5	-13.0	-6.1	-11.5	-10.3	-10.3
Increase/decrease in liquid assets	-3.5	24.7	8.6	6.2	-14.7	-1.6	3.9
Liquid assets at end of period	54.2	78.9	87.4	93.6	78.9	77.3	81.3

Source: Company data, Hauck Aufhäuser Investment Banking

Regional split (EUR m)	2018	2019	2020	2021	2022E	2023E	2024E
Domestic	0.0	0.0	0.0	0.0	0.0	0.0	0.0
yoy change	n/a	n/a	n/a	n/a	n/a	n/a	n/a
Rest of Europe	96.8	110.4	125.9	143.5	163.6	186.5	212.6
yoy change	14.0 %	14.0 %	14.0 %	14.0 %	14.0 %	14.0 %	14.0 %
NAFTA	60.9	70.1	80.6	92.7	106.6	122.5	140.9
yoy change	15.0 %	15.0 %	15.0 %	15.0 %	15.0 %	15.0 %	15.0 %
Asia Pacific	17.9	20.2	22.9	25.8	29.2	33.0	37.3
yoy change	13.0 %	13.0 %	13.0 %	13.0 %	13.0 %	13.0 %	13.0 %
Rest of world	-7.0	-22.2	-53.1	-81.5	-74.8	-103.5	-127.3
yoy change	neg.	neg.	neg.	neg.	neg.	neg.	neg.
TTL	168.7	178.5	176.1	180.4	224.5	238.5	263.5
yoy change	21.7 %	5.8 %	-1.3 %	2.4 %	24.4 %	6.2 %	10.5 %

Source: Company data, Hauck Aufhäuser Investment Banking

5	Hauck Aufhäuser Investment Banking