Ferronordic: Better than feared but margins under pressure - Nordea

Ferronordic reported a mixed set of Q4 2024 numbers, with sales clearly beating our expectation, largely due to significant (and price driven) new unit growth in Germany. We believe our previous organic equipment growth assumption of 8% for 2025 in Germany was too cautious and now pencil in healthy 14% y/y growth. We argue, however, that the difficulties in attaining skilled mechanics for its German operations could hamper the potential growth in the profitable aftermarket, which we expect to be flattish y/y, following a strong 2024, and to partly counteract the expected healthy sequential improvement in the US in the near term. While EBIT came in line with our estimate, excluding the inventory writedowns, we believe this could signal continued margin pressure for the quarters to come, as the company flushes out its inventory. We reiterate our multiples-based valuation range of 8-12x adjusted EV/EBIT yet move our target multiple year to 2026E, which, coupled with minor estimate revisions, yields a slightly higher fair value range of SEK 51-76 (50-75). The share is currently trading at 10.5x 2026E adjusted EV/EBIT, a 10% premium to the international equipment distributor peer group median. Marketing material commissioned by Ferronordic.

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