Quest has entered a new phase, as the divestiture of most of its Renewable Energy (RES) portfolio and the growing contribution of its IT Services and ACS operations are improving the quality and predictability of its earnings base, notes Eurobank Equities in its analysis of the stock, which was funded by the listed group (Sponsored Research).
The group continues to reap the benefits of diversification through three complementary business lines, combining resilient Commercial Activities with the structurally growing IT Services (IT Services) and a Courier Services platform that benefits from recent investments, market share gains, and logistics automation.
We have revised our forecasts to reflect the stronger-than-expected momentum in Quest’s core businesses, the analysts write. Excluding the divested renewable energy business, we are raising our revenue forecasts for the 2026–2028 period by approximately 4% and our EBITDA forecasts by 3%–7%, due to stronger execution in IT Services and a more favorable outlook for ACS.
This effect is partially offset by a more cautious stance regarding Commercial Activities, given the current inflationary and highly competitive retail environment. We now forecast that EBITDA from continuing operations will grow at a compound annual growth rate (CAGR) of approximately 9% over the 2026–2028 period, with the growing contribution of higher-margin service activities gradually improving the quality of the group’s earnings mix.
Quest combines an attractive growth profile with a strong balance sheet, while demonstrating a consistently high ability to convert earnings into cash flows, with operating cash flow (OCF) averaging comfortably above 50% of EBITDA throughout the business cycle. We expect the group to maintain a net cash position throughout the time horizon of our forecasts, despite continued investments, while maintaining a disciplined capital allocation framework, they continue.
Our updated valuation indicates a fair value range of between 7.8 and 9.4 euros per share (after applying a 10% ownership discount). Our base case scenario implies a valuation of approximately 8x EV/EBITDA for 2026 for the group’s segments excluding ACS (Commercial Products, IT Services, Renewable Energy), compared to a valuation of less than 6.5x implied by the current share price.
In our view, the current valuation underestimates both the structurally growing IT Services segment and the potential for profit margin improvement in the commercial segment following the integration of Benrubi.