da Intermonte – DHH company research report

Buon pomeriggio,

di seguito e in allegato inviamo il company research report relativo a DHH a cura di Intermonte.

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Un caro saluto,

Ludovica Bertola

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A Strong Release on Margin and Cash Conversion

• 9M24 results. 9M results met expectations at the EBITDA level, with an 8% positive surprise on the bottom line. Net revenues (€26.8mn, +7% YoY, 1H: +9%) were 2% below estimates, primarily due to flat Datacentre & Networking revenues on lower energy prices passed through to customers, with no impact on margins. Consequently, the adj. EBITDA margin came in higher at 33% (vs. 32% expected, 1H: 33%), offsetting top-line softness. OpEx reflected efficient management, with key increases in raw materials (€2.0mn, +€0.6mn YoY) and wholesale services (€3.5mn, +€0.2mn YoY) driven by higher sales and HW acquisitions. Datacentre costs decreased (€2.1mn, -€0.1mn YoY) due to lower energy prices, while professional services (€2.4mn, -€0.7mn YoY) dropped mainly because of the lack of stock option plans (€1.1mn in FY23). Personnel costs (€5.1mn, 19% of sales) remained under control (+€0.3mn YoY), showcasing the scalability of the business model. The icing on the cake was stronger FCFO (€7.7mn vs €6.1mn exp.), leading to lower net debt (9M: €2.9mn vs. our exp. €3.1mn), a sharp improvement from YE23 (€6.5mn).
• Trends by segment. Business Connectivity was up 10% (1H: +9%), supported by market expansion and advanced connectivity solutions. Cloud Hosting grew by 8% (1H: +7%) while Cloud Computing by 6% (1H: +9%), both benefiting from rising demand for scalable infrastructure. The Datacentre & Networking segment remained stable, with minimal growth (9M: +1%) due to energy price fluctuations. Managed Services saw an 8% decline, while the Other category increased by 36%, reflecting non-recurring and opportunistic sales. The company also emphasized strong growth in its AI-focused infrastructure solutions, particularly GPU and NPU offerings, as a key driver of organic growth, though specific figures were not disclosed due to being competition-sensitive.
• Trends by geography. Top-line growth was observed across all markets, with Italy (9M: +8%, 1H: +10%), Slovenia (9M: +9%, 1H: +8%), Croatia (9M: +10%, 1H: +11%), and Switzerland (9M: +11%, 1H: +11%) delivering strong performances. Bulgaria showed a sequential improvement (9M: +1%, 1H: flat) driven by Evolink’s return to growth after a period of underperformance.
• Change in estimates. FY24 top line trimmed by ~1% to reflect lower pass-through energy components, with no impact on margin. We now expect FY24 growth at 7% (prev. +8%), implying a 7.6% increase in 4Q. No meaningful change to EPS.
• BUY confirmed, TP still €32. Despite some top-line softness due to pass-through energy prices, 9M results confirmed the strength of DHH’s robust and scalable business model, with 94% of revenues being recurring, ensuring high visibility on FCFO (c. 88% conversion rate). Furthermore, we welcome management’s hints that DHH is actively pursuing M&A opportunities in domestic and Mediterranean markets, aiming to expand its cloud computing presence in new regions and enter complementary market segments. Indeed, M&A activity could bring additional upside to our estimates and our DCF-based TP of €32/share (unchanged). At our TP, the stock would trade at 13.5x EV/EBITDA’24E (10x at current prices), at a discount to larger listed peers and recent private deals (c. 15-19x EV/EBITDA).