StepChange levels up on Ord Minnett ‘buy’ call and digital growth outlook

• Ord Minnett boosts StepChange with a ‘buy’ rating and A$0.23 target; 77% upside flagged
• StepChange shares jump 11% to A$0.14 as investors back bullish call
• Analysts tip FY26 as breakout year with growth and M&A tailwinds

Special Report: Shares in StepChange Holdings have jumped about 11.5% on Monday to A$0.14 after Ord Minnett released a ‘buy’ rating and A$0.23 price target, flagging a potential 77% total shareholder return on last week’s closing price.

Ords’ analysts call StepChange (ASX:STH) one of the ASX’s most compelling tech small caps, citing the company’s strong position in digital transformation and enterprise software services.

One of Australia’s largest independent IT consulting providers, StepChange has a solid track record with blue-chip clients across mining, energy and government sectors, all of which are ramping up their digital investment budgets.

Over more than two decades StepChange has built up deep expertise in supporting organisations to optimise ERP (enterprise resource planning) software provided by globally leading German software company SAP.

This, says Ords, places StepChange in a prime position to capitalise on ongoing structural shifts across the IT services industry.

Digital tailwinds

The IT and ERP service markets are benefitting from several concurrent trends: digital transformations at major enterprises, migration of data from on-premises systems to the cloud, the automation of more business processes and a growing appetite to outsource IT operations to specialists.

Another key catalyst in this supercycle of growth is global software leader SAP’s plan to phase out support for its legacy on-premises ERP Central Component (ECC) platform in 2027.

Major investment bank, Morgan Stanley, has forecast the already large US$220 billion global ERP market to grow by 17% annually.

StepChange is expected to post 11% top-line growth in FY26, alongside 2.16% gross margin expansion, supported by new contracts.

Ords analysts describe FY26 as a potential breakout year for STH, citing both organic reacceleration and international expansion potential.

Market ripe for M&A

On top of its robust potential for organic growth, Ords says StepChange’s position within SAP’s service partner network offers substantial M&A scope for scale and capability.

There are more than 120 certified providers across Australia and New Zealand alone and analysts see scope in this fragmented market for StepChange to accelerate its upwards trajectory.

Undervalued versus peers

Despite these catalysts, StepChange trades at just 6.5x FY26F price to earnings (PE) – a 66% discount to domestic peers in the IT services sector.

The analysts call this as “cheap” given the company’s growth outlook, margin uplift and strategic positioning in the high-demand resources and energy sectors.

This article was developed in collaboration with StepChange Holdings, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.=