Nolato: Take-aways from CMD - ABG

Main growth opportunities in Medical and EMC
Not looking to sign new customers in VHP
Financial targets reiterated, as expected

Aims to grow Medical and EMC, M&A focus on Medical
Today we attended Nolato’s Capital Markets Day, held at Clarion Hotel Copenhagen Airport. As we had expected, the strategic focus was on the growth prospects for Medical Solutions and electromagnetic compatibility (EMC) products. In Medical, the key growth areas identified are pharma, diagnostics, and complex medical devices, but Nolato is also working with market leaders in robotic surgery (commercialisation likely several years away). Also, Medical will be the primary focus area for future acquisitions. In EMC, Nolato aims to grow partly in the automotive industry, which is seeing increased EMC implementation, but also long-term in wind and solar (where Nolato can help with AC/DC conversion).

Could grow with existing VHP customer, no new customers
Sentiment around the VHP business has been poor recently, partly because the largest customer is contemplating dual-sourcing. Despite this, Nolato says it is not considering trying to sign new VHP customers, however it added that the possibility of expanding into new product segments with the existing customer is being explored, which we believe refers to entering the e-cigarette market segment (which is somewhat similar to VHP). In addition, despite VHP production being in Beijing, Nolato has only experienced a one-week production stop, after which production was back at full speed, which we find impressive.

Targets kept, news on dual-sourcing expected after summer
All in all, there were no major surprises in today’s presentations. The financial targets of >10% EBITA margin over a business cycle, >75% cash conversion, and >35% equity/assets ratio were all reiterated, as we expected. Also, we did not get any specifics on effects of dual-sourcing in VHP, but the company says it expects to get a decision from its VHP customer after this summer. Finally, ...
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