Nordic Waterproofing: Beating a billion and our expectations - ABG

Q2 results
Sales came in at SEK 1,067m (+5% vs. ABGSCe 1,016m), +12% y-o-y of which 8% was organic (ABGSCe +3%). EBIT increased 18% y-o-y to SEK 160m (+13% vs. ABGSCe 142m), for a margin of 15.0% (ABGSCe 14.0%, 14.4% in Q2’20). Keep in mind that NWG has extremely tough comps, and still manages to grow organically and expand margins. Products & Solutions is once again delivering an impressive result, coming in 11% better on sales and 33% better on EBIT. On the other hand, Installation services had a weak quarter, coming in 10% below on sales and 60% below on EBIT. All markets contributed to the beat, except for Finland, which continues to be weak. NWG mentions that input costs have increased at a high rate, but it has been successful in transferring costs to customers. In terms of outlook, NWG mentions risk of margin compression in H2 if input costs accelerate. However, NWG are generally cautious and we won’t read much into it at this time.

Outlook and estimate changes
Based on the Q2 report alone, we believe preliminary estimate revisions could amount c. +5% revisions on EBIT. However, we expect that the results could be extrapolated to c. 6-7% to account for the strength in prefab elements, which previously have been a drag on margins. NWG mentions that the order books in prefab are fully booked for 2021.

Final thoughts
On our pre-Q2 estimates, NWG is trading at 13x ‘22e EBITA and c. 6% lease adj. FCF yields.

https://www.introduce.se/foretag/nordic-waterproofing/Equity-research/2021/7/nordic-waterproofing---beating-a-billion-and-our-expectations/