Nemetschek (+24% over the month) has once again exceeded market expectations, posting impressive organic growth of +24% in Q4, well above the consensus (+14%).
This German family business, specialising in software for architecture, engineering and construction professionals, continues to stand out despite a sector in difficulty since the Covid crisis. The group has been able to maintain annual organic growth of over 10% since 2019, while transitioning its business model from the sale of perpetual licences to a subscription system, which initially penalised growth.
With this transformation now well underway and a construction market that could benefit from a rebound linked to lower interest rates, we believe that Nemetschek is in a position to accelerate its growth to over 15% per year, while strengthening its profitability and cash generation.
Founded in 1963, the company has established itself as a key player in the sector thanks to the visionary strategy of its founder. By making its software available free of charge to architecture students, he encouraged its widespread adoption in the professional world. Today, proficiency in ArchiCAD (one of the group's flagship software programs) is a key criterion when recruiting for architectural firms.
Introduced into our fund at the beginning of 2023, Nemetschek had a market capitalisation of less than €6 billion. Today, it is worth more than double that and retains considerable growth potential. Its addressable market, estimated at €40 billion in 2023, remains largely underpenetrated: the construction sector, which is still not very digitalised, is struggling to adopt new technologies due to the diversity of the professions involved (architects, engineers, workers) and a very high level of fragmentation (majority of micro-enterprises). The rise of the more digital generations and the obvious gains in productivity, costs, energy efficiency and security should accelerate the transition. Finally, Nemetschek's expansion into vast and under-exploited markets such as India and the Middle East opens up a boulevard of sustainable growth. All these elements reinforce our conviction about its potential to become a future Large Cap.

We have closed our position in Nexi, an Italian digital payments player, whose potential as a future Large Cap now seems to us to be compromised. The end of consolidation in Europe and intensifying competition from Tech Natives should limit its growth. Lacking innovation, we believe that Nexi will struggle to establish itself as a future payment leader.
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