Nolato - Permit granted, time to produce - ABG

Nolato gets the VHP permit, reiterates Q4 guidance
Nolato has announced that it has now been granted the permit to produce vaporiser heating products (VHP) in China, and reiterates its Q4 Integrated Solutions sales guidance of SEK 0.5bn (-33% q-o-q, -66% y-o-y), which was contingent on getting the permit. As a reminder, Nolato had not produced any VHP products since October due to new, more stringent regulations regarding production of tobacco products in China. We had assumed Nolato would get the permit in Q4, as the company had communicated, meaning our current Integrated estimates are already in line with the Q4 guidance. While we do not have consensus figures for individual segments, the fact that management spoke fairly confidently about obtaining the permit in Q4 leads us to believe that consensus estimates are also in line with the guidance.

BAT's inventories should be low, could see a recoil effect in Q1
Nolato's VHP customer, British American Tobacco (BAT) is currently in a phase of rolling out its new product, Glo Hyper X2, meaning it is in need of building up inventories. Since Nolato has not been producing any VHP products since October, we see it as likely that BAT is currently on lower-than-planned inventories, which could cause a recoil effect in Q1 if BAT needs to re-stock.

Trading at 13x '23e EV/EBITA
On our current estimates, the share is now trading at 13x EV/EBITA. Although Nolato getting the permit was already in our estimates, we note that had it been delayed further the Q4 guidance would have been at risk. As such, we see this as a risk-mitigating factor.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/nolato/Equity-research/2022/12/nolato---permit-granted-time-to-produce/