Montega research published today:

Market cap. (in EUR m) 628.2
Enterprise Value (in EUR m) 618.8

Ticker BUL: SLYG

Guidance 2024
- Sales (in EUR m) 105
- EBIT (in EUR m) 26


IFA feedback: Shelly lays the foundation for the next growth
phase

Shelly currently (06.09. – 10.09.) presents itself at the IFA technology fair in Berlin with a
booth in the Smart Home area. We believe that both the size of the booth and the high
visitor traffic in comparison to other industry suppliers confirm Shelly’s positive
development in the last few years. Our discussion with Co-CEO Wolfgang Kirsch mainly
focused on the integration of the acquired LOQED, the further expansion of internal
team structures and the long-term strategy which is to be explained at the Capital
Market Days in November.

LOQED as a prime example for an acquisition: Early in July, Shelly announced the
acquisition of the Dutch LOQED B.V. as part of an asset deal, contributing to the time
and cost-efficient (purchase price: EUR 0.15m) development of a new product category
(smart locks). The company is working on integrating the products both on a hardware
and software level in Bulgaria to be able to present a next-gen product with ShellyOS
next year. Since the acquisition, Shelly has also made significant advances regarding
the sale of its old product generation by agreeing on improved purchase conditions
and expanding its sales using the pan-European retailer network. We expect the launch
of the next-gen products to result in additional tailwind and tangible revenue
contributions in the course of 2025. Security, the Smart Home sub-segment which
includes locks as well as outdoor and indoor cameras, has also been present across
extensive areas at the IFA by suppliers such as IMOU.

Expansion of team structures: Irrespective of the progress made so far, Shelly
continuously expands its corporate structures. Following the recruitment of Karsten
Sommer as Managing Director for the all-important DACH region (cf. Comment on 28
August 2024), the company currently focuses on Finance, HR and Procurement.
Particularly worth mentioning is the set-up of a dedicated purchasing department,
from which the company hopes to achieve better purchasing conditions from Chinese
suppliers in terms of prices as well as payment conditions in the years to come. It is
particularly the high working capital ratio, which we expect to grow to over 50% for the
first time this year (MONe: 51.8%, +5.8pp yoy), which currently still prevents operating
margins from resulting in significant free cash flows as well. Based on the measures
taken we anticipate a slight reduction of the WC ratio to 49.4% next year which should
be reflected in a double-digit positive FCF of EUR 11.2m for the first time in the
company’s history.

Conclusion: The outstanding development of the Shelly Group has been demonstrated
once again this year at the IFA. In comparison to competitors, the products excel with a
combination of high performance, stylish design and an attractive price point.
Furthermore, there is still significant long-term growth potential, driven by an expansion
of the product portfolio as evidenced by the LOQED acquisition. Based on the
combination of extraordinarily high growth and an attractive valuation (PER 2025e:
19.6), we confirm our buy rating with a price target of EUR 49.00.