Hanza: Coming off a record year - ABG

Q1 report due on 3 Tuesday May
Adj. EBITA lowered by 2% for ’22e, ’23e-’24e unchanged
12x ’22e EV/EBITA, ‘21-‘24e adj. EBITA CAGR of 14%

Q1 expectations
We expect HANZA to report Q1 sales of SEK 700m, up 23% y-o-y (+12% org, +11% M&A, +1% FX). In the quarter, the company has had to deal with high sick leave from Omicron and rising input costs. To our understanding, Omicron cases among staff have not led to any lost sales, but we expect that personnel expenses may be a bit higher than usual. However, while rising input costs can be partially passed on to customers, cost inflation should still pressure margins somewhat, both for Main Markets and Other Markets. In addition, the expansion program in Other Markets will continue to add costs in both Q1 and Q2. We expect adj. EBITA of SEK 39m, for a margin of 5.6% (5.0%). In Main Markets, we expect a margin of 7.6% (6.3%), while in Other Markets we expect 3.2% (3.9%). Once the expansion program in Other Markets is complete (in H2’22e), we expect that the gap in margins between the two segments will narrow.

Estimates mostly unchanged
We make minor changes to our estimates. For ’22e, we lower adj. EBITA by 2%, as we continue to see some pressure on margins in both segments for H1’22e, but we still estimate that margins will improve in H2’22e. For ’22e-’24e, we leave our estimates unchanged.

Still ground to gain on margins
2021 was a year of significant operational improvements for HANZA, which can be attributed the company’s cluster strategy resulting in margin expansion. However, while we believe the potential to raise margins further in Main Markets is somewhat limited, the goal is for Other Markets to also expand its margin in the coming years following the completion of the current expansion program. Currently, the share is trading at 12x ’22e EV/EBITA with an estimated 14% adj. EBITA CAGR. Finally, as we only make minor estimate revisions, we reiterate our fair value range of SEK 35-55.
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