YB new stock pitches (Mon, Dec 8)

CeoTronics AG (CEK.DE) is a German critical communications specialist trading at €12.6 with a €29.7 price target (+136%) based on a 30.5x fair P/E ratio versus current lower valuation, positioned to benefit from the geopolitical 'turning point' driving massive European defense spending increases. The company won the largest contract in its history - the SmG framework agreement to equip 191,000 German soldiers with multifunctional CT-MultiPTTs by 2030, with first two lots of 30,000 units each representing ~€52 million in sales spread over FY24/25. Record FY24/25 results showed €55.8 million revenue (+88.3%), €7.8 million EBIT (+209.9%) with 14% margin, demonstrating strong operational leverage with only 4.7% increase in employees while revenue exploded. The company maintains a fortress balance sheet with 66.5% equity ratio (up from 45.4%) and net debt reduced from €17.7 million to €2.3 million. Key catalysts include the expected decision on the 3rd SmG lot in late autumn 2025, potential European follow-up orders following a €13.5 million NATO partner order in April 2025, and structural tailwinds from NATO's 5% GDP defense spending target and EU's €800 billion ReArm Europe initiative. CeoTronics benefits from 94% German content positioning it perfectly for the shift toward local European procurement, though risks include high dependency on government contracts (71.6% of sales from police/defense), supply chain vulnerabilities, and political delays as seen with the 3rd SmG lot postponement due to German early elections.

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Palomar Holdings (PLMR), a specialty property and casualty insurer, delivered an exceptional Q3 2025 with a 75% combined ratio and +44% gross written premium growth, driven primarily by its earthquake insurance portfolio which generates a ~0% loss ratio due to minimal net exposure ($20 million per earthquake versus $3.5 billion in reinsurance coverage). The company operates across five business units including Earthquake (25% of portfolio), Casualty, Fronting, Crop (20%), and Inland Marine/Other Property (20%), with 65% in favorable short-tail lines that allow quick repricing. Management's '2X strategy' targets doubling adjusted net income every 3-5 years while sustaining 20%+ ROE, supported by anticipated growth catalysts including new product launches, increased net retention, margin expansion from softening reinsurance costs, and the pending Gray Surety acquisition. Cedar Street Research forecasts +25% EPS growth in 2026-2027 (versus analyst consensus of +12-15%) and sets a $165 price target based on 15x 2027E EPS of $10.98, while analyst targets range from $145-168. Key growth drivers include Casualty (+170% in Q3), Environmental Liability (+110%), and Crop (targeting $500M premium by 2027 from current levels), though risks include rate pressure in commercial earthquake (-18% rate decrease), canceled Omaha National fronting relationship, early-stage development of long-tail casualty products, and reliance on $1.2 billion of less transparent collateralized insurance-linked securities within their reinsurance structure.

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EXEL Industries SA (EXE.PA), a French family-owned agricultural machinery manufacturer founded in 1946 specializing in spraying and sugar-beet harvesting equipment, has suffered from a four-year agricultural downturn with double-digit revenue declines, margins eroding from high single digits to low single digits due to adverse operating leverage from a fixed cost base (c. 30% of revenue), and the stock now trades at 0.55x book value and a low single digit EV multiple. The company operates through 24 plants with 3,400 employees across Europe, holds c. 350 patents, and generates revenue from agricultural machinery (65%), non-agricultural end-markets (35%), and aftermarket services (20%). The recovery thesis centers on the agricultural cycle bottoming out after four years (among the worst length-wise), dealership destocking completion, crop prices at inflation-adjusted record lows creating unsustainable farmer profitability, and interest rate stabilization with expected medium-term declines according to forward curves. The company maintains modest 1.5x leverage, has tapered capex from elevated levels to a run-rate of €30m in-line with D&A, and offers a potential through-cycle 14% FCFE yield based on €35m FCF generation with a target EV of €350m. Key risks include prolonged downturn if inflation remains high with terrible weather and elevated rates, the company's single-crop specialization, small size, inventory liquidation discounts in fire-sale scenarios, and the recent CEO change in December 2023 when family member Guerric Ballu replaced the prior non-family CEO, suggesting board concerns about mismanagement during the harsh cycle.

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