DE40: DAX gains 0.2%. Cancom surges as Board expects stronger IT growth 📈

• DE40 gains 0.2% after lower-than-forecast Eurozone inflation data
• BMW (BMW.DE), Commerzbank (CBK.DE), Infineon (IFX.DE) and Bayer (BAYN.DE) lead the gains
• Shares of Cancom (DOK.DE) dominate the gains on the German trading floor today.
• MTU Aero Engines (MTU.DE) loses 3.5% after dividend cut to €2 per share

Although today's data from Europe suggests a slowdown on the continent, German companies are mostly gaining; partly due to the prospects of ECB policy easing, partly due to most of the profits generated from operations outside the Old Continent. Holzmann's dovish comments from the ECB today suggested that a deposit rate above 3% may prove hard to sustain, looking at the overall economy, on the European continent. Despite a weaker session in Asia and declines on Wall Street, the DAX is trying to break free from downward pressure. The volatility on DAX may increase at 12:15 AM GMT after ADP report as well as US ISM services reading, scheduled at 3 PM GMT.

DE40 (M15 interval)

Cancom's strong results and optimistic outlook

Cancom, from the German IT industry, has been one of the weakest stocks on the German stock market in recent years. Its 2023 results managed to slightly beat forecasts and came in 2.2% higher on the earnings per share side, at a time when revenues came in line with forecasts. However, the market (contrary to management's forecasts) expects the company to continue to 'outperform' and grow revenues by an average of 7.3% over the next three years versus an average of 8.8% for the German IT market. Cancom's 2023 revenues rose 19% y/y to €1.54 billion, while net income improved 17% y/y to €37.9 million, with maintained operating margins of 2.25%. Earnings per share rose 15% year-on-year to €1.03 in 2023, compared to €0.9 in 2022.

• The company improved free cash flow by more than €148 million y/y and was positive at €94.6 million in 2023
• The board of directors passed an additional dividend for 2023 of EUR 1 per share
• Revenues amounted to EUR 1.5 billion in 2023 compared to EUR 1.29 billion in 2022
• EBITDA rose to €115 million vs. €104 million in 2022
• Gross profit rose 33% to €583 million

The company expects further order growth in the IT sector due to high interest in cybersecurity, Internet of Things (IoT) and AI. The company also completed the acquisition of a unit of KBC Group, which from now on will take the name CANCOM Austria. In opposition to market expectations, the company expects revenues in the range of €1.7 billion to €2 billion in 2024 and gross profits in the range of between €640 million and €740 million, with EBITDA improving to €155 million. More 30% growth rate in key business indicators is possible.

Cancom (COK.DE) shares, D1 interval

The stock managed to break through key resistance at €28.7 per share (71.6 Fibonacci retracement of the 2105 upward wave), potentially opening the way to €33 per share (61.8 Fibo).

News from the companies

• Bankhaus Metzler raised its target price for Rheinmentall (RHM.DE) to €705
• Infineon (IFX.DE) was upgraded at Morgan Stanley due to negative news reflected in the stock's price
• According to Reuteres, Thysen Krupp (TKA.DE) is expected to provide more information on restructuring next week

Source: Bloomberg Financial LP, XTB Research

Source: Bloomberg Financial LP, XTB Research