Nolato: VHP sales expected to bottom out in Q3 - ABG

Weak guidance for Integrated Solutions in Q3… …but the worst should be behind us Clarity on dual sourcing lowers risk of more downgrades Q2 above cons. but weak Q3 guidance made the headlines
Nolato reported Q2 organic growth of -6% (ABGSCe -10%), but the top-line was also helped by a 10% FX boost. Adj. EBITA was 10% above consensus, but the beat was a sales-driven one, while the 9.1% margin was in line (ABGSCe 9.1%, Infront cons. 9.3%). Integrated Solutions was ~10% above the company’s previous Q2 EBITA guidance thanks to an early delivery in June (originally scheduled for July). Meanwhile, Medical Solutions EBITA was 14% above consensus, although expectations had been lowered going into the report, and the margin was still down by 210bps y-o-y. What stole the headlines, though, was the weak guidance in Integrated Solutions (-25% q-o-q growth in Q3), which in itself would imply a 14% group sales downgrade for Q3’22e, and 3% for FY’22e.

More clarity on dual sourcing decreases estimate risk Management stated during the conference call that given current information, it expects VHP sales to bottom out in Q3 due to both lost demand in Eastern Europe and a dual sourcing effect. While the effects of dual sourcing came earlier than we had expected (we thought the impact would mostly come in ’23e), it is still positive that we now have more concrete information on the situation, as we were previously entirely in the dark. This means that while we lower our adj. EBITA estimates by 7-4% for ’22e-‘24e, driven mostly by Integrated Solutions, the risk of further downgrades is now reduced.

Trough in Q3 sets the stage for earnings growth in ’23 Our estimates now have earnings bottoming out in Q3, but we estimate an adj. EBITA CAGR of 21% for ’22e-‘24e. The share is now trading at 16x ’22e EV/EBITA, which shifts lower to 12x in ’23e.

Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/nolato/Equity-research/2022/7/nolato---vhp-sales-expected-to-bottom-out-in-q3/