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SAP Equity The Best €IG Performer Post-CMD

TECHNOLOGY

Rating: A1/A+

  • SAP equity performing well after their CMD; EUR bonds muted but slightly tighter. The CMD looks credit positive albeit not a spread mover given very tight levels and no significant shifts in balance sheet policy.

  • FY24/FY25 targets were affirmed which is likely seen as assuring given concerns at other large tech firms.
  • Revenue seen accelerating through 2027 and appears ahead of BBG consensus; company-provided consensus sees total revenue +8% this year and +11% in FY25 with BBG-consensus then (roughly) implying +11% and +9% in FY26 and FY27.
  • Equity analysts noting reference to the Rule of 40 for the first time which may serve as an anchor for LT projections. The rule implies that FCF Margin + Rev Growth should roughly equal 40% for SaaS companies; we see the FY23 value as 25% (16% + 9%).
  • Slight shift in dividend policy (from >40% of IFRS PAT to 40% of non-IFRS PAT from cont. ops) doesn’t look a significant change given similar levels in FY23 though may contribute to more stability in payout ratios given volatility in the older metric.
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