Nolato: Looking ahead at the ’23e margin recovery - ABG

Several factors weighed on Q3 margins
We maintain our view on a ’23e margin recovery
11x ’22e EV/EBITA, fair value SEK 45-85 (50-90)


Q3: Low VHP volumes and pressured Medical margins

Nolato reported Q3 sales of SEK 2,626m (+4% vs. ABGSCe SEK 2,537m, +3% vs. FactSet cons. SEK 2,557m). At group level, organic growth was -24% (ABGSCe -26%), burdened by Integrated at -60%, while Medical remained solid at +13% (~50/50 price and volumes). Margins remained pressured due to several factors, and looking at Medical Solutions in particular we saw: 1) a poor sales mix due to de-stocking effects in the high-margin in vitro diagnostics (IVD) segment, 2) declining capacity utilisation, and 3) continued lag in moving on high input costs. This resulted in an EBITA of SEK 214m (-7% vs. ABGSCe SEK 230m, -8% vs. cons. SEK 232m), for a margin of 8.1% (ABGSCe 9.1%, cons 9.1%). On a bright note, the cash flow was strong (~100% FCF conversion), following several quarters where NWC build-up weighed on FCF.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/nolato/Equity-research/2022/10/nolato---looking-ahead-at-the-23e-margin-recovery/