Nordic Waterproofing: Lower newbuild activity leaving a mark - ABG

Volume decline and continued high input costs in Q3
EBIT lowered 3% for ’22e-’23e, ’24e mostly unchanged
Trading at 10x EV/EBIT on est. ’23e earnings trough


Starting to see effects of lower newbuild activity

Nordic Waterproofing (NWG) reported Q3 sales of SEK 1,132m (-2% vs. ABGSCe 1,155m), up 13% y-o-y. Organic growth was 4% (ABGSCe 7%), with -9% from volumes and +13% from price. We are now starting to see more of an effect from lower newbuild activity, which should continue into ’23 given that projects are still being cancelled today, according to management (affects NWG with a 2-3 quarter lag). On the bright side, Installation Services seems to be back to decent earnings following a period of difficulties in moving on higher input costs. Meanwhile, the company sees input costs starting to stabilise, albeit still at a high level, leading to EBIT of SEK 128m (-8% vs. ABGSCe 140m) and a margin of 11.3% (ABGSCe 12.1%, 14.0% in Q3’21). If input costs come down, NWG should be able to maintain elevated prices for ~2 quarters, as has been the case historically. Finally, cash flow was strong in the quarter thanks to released working capital, which the company says should be the case in Q4’22 as well.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/nordic-waterproofing/Equity-research/2022/10/nordic-waterproofing---lower-newbuild-activity-leaving-a-mark/