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Seeking above target market growth

Gofore is one of the fastest-growing yet profitable public IT-services companies in Finland, seeking to profile itself more towards a digitalization consultancy company. Gofore aims to grow faster than the target market, new digitalization services, while at the same time seeking to generate an EBITA-margin of 15%. Gofore has a solid track-record, having achieved a net sales CAGR of 47.5% between 2014-2019, while adj. EBITA-margins have remained well in double-digit figures. Relative organic growth has slowed down from recent peak years, but M&A activity supports continued double-digit growth.

Continued good growth and profitability outlook

Aided by the acquisition of Qentinel Finland we expect Gofore to grow 14.5% in 2021. The uncertainty brought by the coronavirus pandemic poses some risks to customer activity, but the high share of revenue from public sector clients has so far mitigated a lot of the potential impact, as private sector demand has during the year been more affected. Apart from a potential impact of the recent increased share of subcontracting, we do not see significant risks to margins going forward and expect a 13.8% average adj. EBITA-margin during 2020E-2022E, slightly below the target 15%.

HOLD with a target price of EUR 12.1 (8.6)

We value Gofore at 17.5x 2021 adj. P/E (excludes goodwill amortization), implying a 26% premium to our peer group and a 34% premium to the finnish peers. We adjust our target price to EUR 12.1 (8.6) and retain our HOLD-rating.

Source: Finwire News.

Gofore is a digital services company that has grown strongly since operations started in 2002. We offer modern digitalisation services that enable operators in the private and public sectors to meet digital change. Our services span the entire value chain – from management consultation to service design and implementation, as well as cloud services. Our mission is to change the world for the better through digitalisation and by renewing ways of working. Staying on top and ahead of the development requires us to be fast-paced, regenerative and competitive.