I-tech - Q2e: Another quarter of stable growth - ABG

Q2e: continued sales growth
We expect sales of SEK 35m, up 9% y-o-y (+7% org., +1.6% FX). We estimate EBIT adj. of SEK 9m (7m), for a margin of 25.4% (22.6%), which converts to net income adj. of SEK 9m (8m). This implies EPS adj. of SEK 0.79 (0.68), and FCF of SEK 8m (6m). Overall, we expect Q2 to be a solid quarter with continued sales growth.

New CEO set to take office in October
We make minor changes to '24e-'26e. I-Tech recently announced its new CEO, Markus Jönsson, who is expected to take office on 1 October. Jönsson has expressed his vision of leading I-Tech into a next phase of development, which aims to expand its portfolio with more speciality chemical solutions for marine coatings and adjacent applications. The EU regulatory issue remains for I-Tech, and we expect continued elevated costs in the near term. During the quarter the company announced that the ECHA's Biocidal Products Committee (BPC) adopted an opinion that Selektope has endocrine disrupting (ED) properties. I-Tech is now at the stage where the European Commission decides whether a renewal of the approval can be justified, based on socio-economic considerations.

BPC decision setback, long-term potential unchanged
While the recent BPC decision was a setback for I-Tech, we believe the company still has a good case for renewal, based on the negligible exposure, essential use and limited availability of alternative substances criteria for exception from the ED rules. It is important to note that the EU only constitutes 10% of the market for Selektope and I-Tech's sales. We thus believe I-Tech's long-term potential would remain intact even if the EU did not grant renewed approval. The share is currently trading at 11x-5x EV/EBIT '24e-'26e, and 13x-9x P/E '24e-'26e i.e. ~60% below the peer median. We reiterate our fair value range of SEK 55-140.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/i-tech/Equity-research/2024/8/i-tech---q2e-another-quarter-of-stable-growth/