Ferronordic - US likely stable while Germany struggles - ABG

Q2e: US operations stable, Germany still struggling
We expect Ferronordic to report Q2 net sales of SEK 1,205m, up 79% y-o-y due to the major acquisition of Rudd in the US. We anticipate a clear discrepancy between the company's two main segments, USA and Germany. The US operations look set to remain stable in Q2, but we note a material drop in the US July ISM PMI to 46.8 (compared to the Q2 average of 48.8), which adds some downside risk to our H2 estimates should the trend continue. In Germany, the truck market has been weak for some time with PMIs in the low 40s, and we see no clear trend shift in the near term. All in all, we estimate an EBIT of SEK 29m, of which SEK +63m from the US, SEK -15m from Germany, and the remainder from Kazakhstan and group functions.

We cut EBIT by 7-5%, Germany the main driver
We lower our EBIT estimates by 7-5% for '24e-'26e. The main driver is assumed lower demand in Germany, which as outlined above continues to see very weak economic activity: we now expect soft figures in Germany for the remainder of '24e. In the US, we make only minor revisions.

Trading at 15-9x '24e-'25e EV/EBIT, high debt near term
For '24e the share trades at 15x EV/EBIT, 21% above our distributor peer group, but for '25e Ferronordic's multiple drops to 9x, which is 24% below peers. In the near term, Ferronordic's balance sheet remains somewhat strained following the acquisition of Rudd, which accounts for 57% of our NTM sales. The company has been clear that it plans to expand further in the US, which is also a market we find attractive given its major planned infrastructure programs that should boost construction equipment demand, but we note that the '24e ND/EBITDA of 2.7x limits expansion opportunities in the near term.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ferronordic/Equity-research/