Goldring sees Aages shares in the range of 7.08-7.11 lei, above the current market price

The Market Analysis and Strategies Department of the Goldring brokerage house estimates a target price of between 7.08 lei and 7.11 lei for the shares of the induction heating equipment manufacturer Aages Târgu Mureş, in the next twelve months, 10-11% above the company's share price in the market on Thursday, of 6.4 lei, according to a report published on the company's website in the second half of last week, signed by Roxana Stejerean.

"The results reported in the period January-September 2024 exceed market estimates, especially as a result of an exceptional result in the first six months of 2024," the Goldring report states.

According to the document, Aages' net turnover rose by 42%, to 39.5 million lei, above initial market estimates, amid faster growth in revenues than expenses, which highlights an improvement in operational efficiency and suggests a careful optimization of the cost structure despite persistent inflationary pressures. "Management's ability to keep the increase in personnel expenses under control (+26.9%) in the context of labor market tensions remains a positive aspect, contributing to an operating margin of 19.4% in the first nine months of 2024, compared to 15.4% in the same period of the previous year," Goldring writes.

Aages' financial result appreciated by 0.24 million lei, an evolution predominantly determined by the optimization of the financing structure by significantly reducing financial expenses by 0.49 million lei, as a result of the prudent loan repayment strategy. "In this favorable context of convergence between operational performance and optimization of financing costs, net profit recorded an increase of 83.1%, compared to the same period in 2023, reaching the level of 8.2 million lei on September 30, 2024," the report states.

Analysts point out that, for this year, Aages has budgeted a turnover of around 46 million lei, but which, in their opinion, will be exceeded. "The analysis of the degree of budget achievement in the period 2021-2023, which consistently exceeded 110%, corroborated with the current dynamics of the activity, supports a forecast of 50 million lei for the annual turnover, above the budgeted level, which incorporates both the historical behavior of the company in relation to the budget targets, as well as the figures demonstrated in the first three quarters of the current year," write Goldring.

The brokerage house team also shows that, for this year, Aages has budgeted a net profit of 7 million lei, already obtained in the period January-September 2024. "Taking into account the historical degree of achievement, we estimate the achievement of a net result for the whole year of 7.6 million lei. This estimate assumes maintaining the profit margin in the vicinity of the 15% level, observed historically and assumed in the budget, reflecting the company's proven ability to efficiently manage its cost structure even in periods of accelerated activity expansion," the report states.

For the evaluation, analysts use a combination of the market multiples comparison method, through which they obtained a value of 7.08 lei for the Aages share, and the discounted cash flow method, through which they obtained a value of 7.11 lei.

The report of the Goldring Analysis and Strategies Department can be consulted in the attached report.

The company's majority shareholder is AAGES Head Invest, with a holding of over 53% of the induction heating equipment manufacturer.