JOST Werke: Unlocking Hidden Value Through Strategic Acquisitions and Margin Mastery

The acquisition of Hyva Group has positioned JOST Werke (JOST) as a hidden gem in the industrial machinery sector, offering investors a compelling mix of near-term growth and long-term margin expansion. While market volatility has recently weighed on the stock, the company’s Q1 2025 results underscore a strategic play to unlock value through disciplined integration and free cash flow generation. Here’s why JOST is primed to outperform.

The Hyva Merger: A Catalyst for Sales Growth and Synergy-Driven Value

The acquisition of Hyva—completed in January 2025—immediately expanded JOST’s sales by 25% to €373.7 million in Q1, with Hyva contributing €103.9 million. While organic sales dipped 9% due to macro headwinds in transport and agriculture, the merger added 3,000 employees, 35+ countries, and a new hydraulics segment, which now accounts for 17% of sales. This geographic and product diversification is critical: APAC sales surged 97%, offsetting weaker demand in the Americas and EMEA.

The merger’s true value, however, lies in its €27 million annual EBIT synergies, which JOST is aggressively pursuing through 30 integration teams. These synergies aim to lift Hyva’s margins from their current low levels to JOST’s target corridor of 10–12% within two years. Early progress is evident: free cash flow rose 26% to €44.2 million, while cash conversion improved to 1.8x, well above the 1.0x target.

Margin Pressures Are Temporary—Synergy-Driven Recovery Is Imminent

While adjusted EBIT margins dipped to 9.6% in Q1 (vs. 11.6% in 2024), this reflects the inclusion of Hyva’s lower-margin business—a short-term cost of long-term gain. By 2027, synergies should push Hyva’s margins into JOST’s target range, boosting consolidated margins meaningfully. Management has already identified cost savings in procurement, R&D, and logistics, with one-off integration costs capped at €24 million—a small price for €27 million in recurring benefits.

Debt Is Manageable, Free Cash Flow Is the Safety Net

Despite net debt soaring to €451.5 million (up 178% year-on-year), JOST’s leverage ratio remains disciplined at 2.45x, comfortably below the 2.5x threshold. Crucially, free cash flow growth has outpaced debt issuance, with cash conversion ratios hitting 1.8x—a robust buffer against macro risks. The €320 million promissory note loan issued in April 2025, structured across 3-, 5-, and 7-year tranches, further stabilizes funding costs.

Why Buy Now? Near-Term Volatility Masks Long-Term Value

The stock’s recent dip—down 1.4% on May 14—has created a buying opportunity. The shares remain near their 52-week high of €55.80, reflecting investor confidence in JOST’s post-merger trajectory. Key catalysts ahead:
- Synergy realization: €27 million in annual savings are achievable by 2027, underpinning margin expansion.
- Market stabilization: EMEA’s transport sector and APAC’s agriculture market are showing signs of recovery.
- Debt deleveraging: Free cash flow growth should reduce leverage to below 2.0x by 2026.

Risks? Mitigated by Diversification and Cash

Risks include U.S. tariffs impacting Americas’ sales and execution delays in integration. However, JOST’s “local-for-local” production strategy mitigates tariff risks, while APAC’s strong growth (97% in Q1) provides a geographic hedge.

Conclusion: A Compelling Buy at Current Levels

JOST Werke is a rare blend of immediate growth (50–60% sales expansion in 2025) and margin-driven value creation. With free cash flow accelerating and leverage under control, the stock offers a high reward-to-risk ratio. Investors should view near-term volatility as a buying opportunity to capitalize on the Hyva merger’s full potential.

Action: Accumulate JOST shares at current levels. The path to 10–12% margins is clear—and the payoff is just beginning.