Ferronordic: EBIT beat as market recovery continues - ABG

Record-breaking EBIT of SEK 144m (+10% vs. cons)
’21-23e EBIT up by 3%, driven by raised CS estimates
Fair value range of SEK 261-338 (253-327) per share

Ferronordic reported Q2 sales of SEK 1,590m (+2% vs. ABGSCe, -4% vs. Infront cons), up 32% y-o-y (51% org, -20% FX, 1% M&A). The strong growth was driven by the Russian CE market recovery and the strong performance of the CS segment (115% org growth y-o-y), with the Norilsk project now operating at full capacity. EBIT was a record SEK 144m (+11% vs. ABGSCe, +10% vs. cons), for a margin of 9.0% (ABGSCe 8.3%, cons 7.9%), up from 8.7% in Q2’20. This was due to the higher-margin segments, CS and AM, outperforming expectations as well as Russia/CIS making up a larger share of group revenue, thereby mitigating the margin dilution from Germany. However, SG&A costs returning after the pandemic had an offsetting effect, although SG&A/sales was still down 50bp y-o-y. Management gave a positive outlook, driven by a ramp-up in the “National Projects” investments and high commodity prices driving CE demand. However, the potential CE utilisation fee increase in Russia and more supply chain issues still pose risks.

We arrive at a fair value range of SEK 261-338 (253-327) per share based on a ’22e EV/EBIT range of 6-8x, which is 42-56% below global CE peers. On our estimates, Ferronordic is trading at 6.6x ’22e EV/EBIT (52% below peers) while offering 10% ’22e lease adj. FCF yield (5 pp above peers).

Länk till analysen i sin helhet: https://www.introduce.se/foretag/ferronordic/Equity-research/2021/8/ferronordic---ebit-beat-as-market-recovery-continues/