Nordic Waterproofing: Better Q3, but market weakness persists - ABG

- Both segments performed above our expectations in Q3
- EBIT up 2-1%, market to remain weak in H1'25e
- 15x '24e EV/EBIT on bottom-of-cycle earnings, 11x for '25e

Q3 better than expected, but end-markets still soft
Nordic Waterproofing (NWG) reported a strong Q3, with EBIT 12% and 14% above our estimate and FactSet consensus, respectively. This was partly driven by higher than expected sales, but also by a stronger gross margin, which was helped by lower raw material costs. With that said, the weakness in prefabricated elements persists, as does the market for the Installation Services segment.

'24-'26e EBIT up 2-1%
The company's statements regarding the market outlook remained much the same as in prior reports. It expects commercial newbuilds and renovations will remain stable, while it expects residential newbuilds will see continued near-term weakness. Overall, the company expects its main markets to see more favourable conditions on aggregate in 2025. Also, management said in the conference call that excluding seasonality effects it does not see a reason to think margins will come down from here. Following a stronger than expected report, but largely unchanged outlook statements, we make only minor revisions and raise EBIT by 2-1% for '24-'25e.

Trading at 15-11x '24-'25e EV/EBIT
The share is trading at 15x '24e EV/EBIT on what we argue is bottom-of-cycle earnings. This multiple goes to 11x for '25e though, which is 12% below peers (BALCO, INWI, LIAB, NOBI, SYSR). We also note that our current estimates have organic growth picking up mainly in H2'25e, and as such '25e does not represent NWG's fully normalised earnings power. Finally, with our revisions, we raise our fair value range slightly to SEK 140-195 (135-190) per share.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/nordic-waterproofing/Equity-research/2024/10/nordic-waterproofing---better-q3-but-market-weakness-persists/