Analyst Note| Denise Molina, CFA |
Following GEA Group’s solid third-quarter results and recent capital markets day, we are increasing our fair value estimate to EUR 43 per share from EUR 35. We maintain our wide moat rating. Two key factors are behind our fair value estimate increase. The first is a 60-basis-point bump to our long-term EBITDA margin, to 15.1%. The second is a higher revenue growth forecast in the medium term, to 4% from 3%. The benefits of new management's decentralization strategy have been showing in more consistent top-line performance as well as margin expansion. Growth in small base-level orders, which are less than EUR 1 million, have been encouraging, particularly around the company’s moatiest segment, separation flow technologies. These smaller orders contribute more than half of the company's new orders, and smaller orders within the SFT division are roughly one fifth of the group. SFT small orders have been outgrowing total small order growth throughout 2021.