Alcadon - Strong momentum in both UK and Germany - ABG

UK and Germany both strong, and margins improve
Alcadon reported Q4 sales of SEK 401m (+2% vs. ABGSCe SEK 394m, +5% vs. Bloomberg cons. SEK 381m), with the deviation stemming from a strong performance in the UK and Sweden, as well as a significant ramp-up in Germany where it had struggled in prior quarters. The gross margin was helped by moving on costs to customers, and when adjusting for the dilutive effect from the recent Networks Centre (NWC) acquisition, it was once again in line with historical averages in the remaining markets following several quarters of GM pressure. This resulted in an adj. EBIT of SEK 24.7m (+8% vs. ABGSCe SEK 22.8m, +9% vs. cons. SEK 22.7m).

Higher amortisation weighs on EBIT ests; we switch to EBITA
As of Q4, Alcadon started taking notably higher PPA amortisation due to the NWC acquisition, and as a result we switch our "headline number" from EBIT to EBITA, which now better reflects the operational performance, in our view. Due to the larger-than-expected amortisation increase, '23e-'24e EBIT comes down by 4-5%, however the effect would have been ~10% had we not also raised underlying estimates, mainly in the UK. Our new EBITA estimates for '23-'24 are now 5-3% above our old EBIT estimates, which we argue is a more apt comparison.

14x '23e EV/EBITA, 35% '22-'25e adj. EBITA CAGR
The share is trading at 14x '23e EV/EBITA with an adj. EBITA CAGR of 35% for '22-'25e. During this period, we have modelled the adj. EBITA margin going from 6.6% to 9.3%, which is still 1.5pp below the company's "Vision 2025" margin target of 10.8%. If the company reaches its targeted SEK 280m EBITA for '25, that would imply an EV/EBITA multiple of 6.4x; on our estimates it is trading at 10x for '25e, although we note that an additional capital injection could be required to reach the ambitious target.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/alcadon/Equity-research/2023/2/alcadon---strong-momentum-in-both-uk-and-germany/