Alcadon: Everything is in place for organic growth - ABG

Q2 expectations
We forecast sales growth of 36% (-14% organic, 49% M&A, 1% FX) in Q2’21e, mainly driven by the acquisition of 6X International and continued strong market development in Denmark and Germany. As in Q1’21, we expect the commercial property market to be affected by the pandemic. Furthermore, market participants within FTTH in Sweden and Norway should await the decided government grants for 2021-2022 before significant projects starts begin, which forecast will not happen until year-end 2021. Combined, it should weigh on organic growth in Q2’21e. We estimate EBIT of SEK 19m, up 8% y-o-y, for a margin of c. 11%, down 320bp, driven by price increases within raw materials (copper and plastic). We expect that the profitability impact is short-term while cost increases should be in progress of translating to price increases for its customers, driving organic growth.

Estimate changes and outlook
During Q2’21, Alcadon has signed three major contracts through 6X International, two in Denmark with Danish broadband and energy group Norlys and one in Germany with Emtelle, Europe's leading producer of ducts and optical fiber systems. Thus, we raise our ‘21e-‘23e sales estimates by 3-4% and EBIT estimates by 4-6%. Overall, we forecast FY’21 growth of 59% (M&A 64%, organic -4%, -1% FX), with EBIT margins of c. 11%, implying 84% EBIT growth. We expect the acquisition of 6X International and the entrance into the two important market segments of Denmark and Germany, in combination with a recovery in the Swedish and Norwegian end-markets, to contribute to organic growth in ‘22e and ‘23e of 9% and 7%, respectively.

Trading at 9x ‘22e EV/EBIT with 10% ‘23e lease adj. FCF yield
Alcadon is trading at c. 9x EV/EBIT in ‘22e, slightly below its 3-year average and offering a lease adj. ‘23e FCF of 10%. We see a strong outlook over the coming years following the acquisition of 6X International and strong market fundamentals, with a 32% ’20-‘23e EBIT CAGR.

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