We reiterate our Neutral rating but raise our DCF-derived fair value to EUR70 from EUR68 as we increase our adj. EPS ests. by 1% for 2016-17 (+EUR1/share) and our medium-term adj. EBIT margin assumption to 32.5% from 32% (+EUR1/share). The key messages of Q3 15 results are encouraging: 1). S/4HANA is starting to play a role for solid licence sales and is likely to have a positive impact on the low-to-mid single-digit licence sales average decline expected by SAP by 2020; 2). Cloud subscriptions are significantly improving profitability, thus reducing their dilutive effect to the operating margin; 3). For 2016, SAP is poised to exceed EUR500m cost savings from restructurings.
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