Yesterday, DOC released strong Q1 results defying the fear of slowing air travel. Against this backdrop, the guidance was also confirmed. In detail:

Q1 revenues increased by 11% yoy to € 612m, driven by growth across all segments: Airline Catering (AC) grew by +11% yoy to € 467m on the back of ongoing and past customers wins, e.g. Delta Airlines at JFK, but also thanks to continuously growing demand with existing customers. International Event Catering (IEC) grew against a tough comparable base (EURO 2024) by +10% yoy to € 100m thanks to strong performances in F1 (one more race and good locations compared to Q1’24) as well solid utilizations at sport events (UEFA CL and FIFA Club WC) as well as music concerts. Restaurants, Lounges and Hotels (RLH) also showed a strong development with revenues of € 44m (+8% yoy) driven by growth across all three subdivisions on the back of unbroken demand. In general, Q1 sales growth could have been ever higher, but was hindered by a negative FX effect of € 30m (i.e. +16% yoy sales growth in constant currency).

Q1 marked a new EBIT record as it expanded by 44% yoy to € 53m (8.6% margin, up 2pp yoy and 0.1pp qoq). Generally speaking, the main driver was the improved gross margin (+2pp yoy) mainly thanks a relative cost reduction in AC (JFK ramp up costs in Q1’24/25). Out of the absolute € 16m yoy EBIT increase on group level, € 13.1m yoy came from AC (16% incremental EBIT margin), € 1.2m yoy came from IEC (13% incremental EBIT margin) and € 1.6m yoy came from RLH (49% incremental EBIT margin) highlighting the strong margin profile in this segment. On group level, Q1 thus showed a 26% incremental EBIT margin, highlighting the profitability gains stemming from a low fixed cost ratio coupled with revenue growth.

On the back of the developments described above, cash generation improved drastically on a yoy comparison. CFO went up by € 20m or 156% yoy to € 32.5m on the back of higher earnings and slightly lower tie up in working capital. Secondly, investments nearly halved from € 18.5m (Q1 24/25) to € 9.6m, resulting in an excellent FCF of € 23m (vs. € -5.8m in Q1’24/25).

Against prior fears of slowing demand, DOC is experiencing the opposite and thus reiterated its FY’25/26 guidance of 8-10% sales growth but specified the EBIT margin target to the upper end of 8.0-8.5%. In the mid-term, a continuous momentum is expected (8-10% sales growth annually, € 3bn sales within the next years) with continuously expanding margins due to operating leverage.

Against this backdrop, we adapt our assumptions to reflect a better than expected profitability and demand curve into the following years. In effect, we therefore increase our DCF-based PT to € 266 (old: € 235) and confirm the BUY recommendation.

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