RCB-Research: "We upgrade Palfinger to BUY from HOLD with a marginally reduced target price of EUR 27 (EUR 27.5). Amid the recent market weakness Palfinger shares have plummeted which we attribute to a combination of exposure to geopolitically tense regions (with Russia at the forefront) and a still rich valuation. 2Q results admittedly provided no catalyst and we found our flagged concern that 2014e earnings estimates might be too punchy as confirmed. Having lowered EPS estimates by slightly double-digit magnitude (reflecting lower confidence in the valuation partly compensated for by the application of lower risk-free rates throughout our coverage universe) we believe that market expectations will also come down. However, meanwhile the stock trades at a level which from our point of view offers a compelling entry point into an otherwise intact growth story. Having typically traded at premiums to the peer group, we see a valuation that is largely in line based on our new estimates. 

2Q fell shy of our forecasts: Palfingers 2Q results were generally a bit below expectations. Revenues rose 9% to EUR 273 mn, ca. 2% below RCBe and fully in line with consensus. Compared to our forecast the deviation solely stems from European Units. EBIT of EUR 20.9 mn fell shy of our top-of-the-range estimate of EUR23.6 mn and was fractionally below consensus of ca. EUR 22 mn. Thus, the margin came in at 7.7% vs. RCBe of 8.5%. While the operating profit of EUR 4 mn in Area Units (margin 4%) again was fully in line with estimates, EBIT in European Units of EUR 20.8 mn (-13% yoy, margin 11.2%) was ca. 13% below our projection. EPS of EUR 0.35 compares to RCBe of EUR 0.42 and consensus of EUR 0.38. Elsewhere we note that the cash generation looked weak owing to a substantial working capital increase. Due to the cash outflow related to the acquisition of the stake in Sany Lifting of EUR 110 mn, net debt rose strongly to EUR343 mn from EUR 271 mn in 1Q. Gearing amounted to 75%.

Earnings projections lowered: We moderately lower our top line forecasts by 1-2% through 2016e. Reflecting more caution in Palfingers margin development we cut EBIT by 10%, 9% and 4% to EUR 83.5 mn, EUR 100.8 mn and EUR 119.7 mn. Our new EPS estimates stand at EUR 1.38 (EUR 1.55), EUR 1.65 (EUR 1.87) and EUR 2.03 (EUR 2.16), respectively.

Valuation: Our total-return target price of EUR 27 is based on a combination of a DCF valuation (suggests ca. EUR 28, 2/3 weighting) and an economic profit model (renders EUR 24, weighting 1/3). Compared to the sector Palfinger trades fully in line on 2014-15e EV/EBIT (12.7x and 10.3x) and EV/EBITDA of 9.0x and 7.6x, respectively. While trading a slight discount on 2014e P/Es of 16.3x, the company enjoys a premium on 2015e (13.6x)."

Palfinger

Palfinger: Letzter Schlusskurs (Euro): 22.510, das ist der 143. beste von 150 Handelstagen (%-Perf.) , das ist der 149. beste von 150 Handelstagen (Preis) , Periodenhoch am 17.01.14 (Kurs: 33.900 Δ% -33.6), Periodentief am 04.08.14 (Kurs: 22.370 Δ% 0.63), 150 Handelstage, davon ↑ 74 → 1 ↓ 75 , Performance Periode: -21.98 %, Umsatz '14/'13: 91 %

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