First Berlin Equity Research has published a research update on ParTec AG (ISIN: DE000A3E5A34). Analyst Simon Scholes reiterated his BUY rating and decreased the price target from EUR 220.00 to EUR 170.00.

Abstract
2023 sales rose 165% y/y to €95.7m (2022: €36.1m) and were close to our forecast of €96.8m. The gap between 2023 EBIT of €14.4m (excluding write-offs on receivables) (2022: €17.3m) and our forecast of €15.6m was roughly equally attributable to a slightly lower gross margin (30.2% vs FBe: 30.9%) and higher recruitment and travel costs than we had modelled. ParTec has given 2024 revenue guidance of €200m, which is below the estimate of €335.2m in our initiating coverage study of 26 March and also consensus of over €300m. 2024 revenue guidance is below these estimates for four reasons. First, delays are expected in the vendor segment. These may result in revenues planned for H2/24 being pushed into H1/25. Second, management has indicated that ParTec’s near-term AI machine strategy will be orientated towards a small number of larger projects rather than a large number of smaller projects. Against this background, we have pushed forecast 2024 revenues from smaller machines into next year. Third, software & support revenues are likely to be below the originally expected level due to delays in the project business. Fourth, the court case against Microsoft is likely to crimp license income. While we have reduced our 2024 forecasts, we continue to believe that the ParTec growth story is intact. We expect rising project volume in the Vendor segment and fast-growing AI machine revenues to drive group sales at a 59.7% CAGR between 2024 and 2027. We maintain our Buy recommendation but have reduced our price target to €170 (previously: €220) to reflect the recalibration of our forecasts.