Nordic Waterproofing: Rough market conditions persist - ABG

- Q2 EBIT 4% below FactSet consensus on lower margin
- We lower our '24e-'26e EBIT estimates by 7-3%
- 15x EV/EBIT on depressed '24e earnings, 11x in '25e

Q3e: flattening volume decline, prices seem to have troughed
Nordic Waterproofing (NWG) delivered a Q2 EBIT that was 4% below FactSet consensus, mainly due to a slightly lower margin. On outlook, not much changed, with the company expecting that newbuild activity will start improving in early 2025, which with the typical lag effects would imply that NWG's sales will start to improve around mid-'25e. Moreover, we were positively surprised by management indicating on the conference call that prices are not coming down, but rather that it is considering raising prices slightly in some verticals ahead. Going into Q3e, we expect a fairly similar magnitude of volume decline and some slight tailwind from lower costs y-o-y, resulting in an estimated Q3 EBIT of SEK 123m, up 7% y-o-y.

Negative, margin-driven EBIT revisions of 7-3%
We lower our EBIT estimates for '24e-'26e by 7-3%, for the most part due to lowered margin assumptions.

15x EV/EBIT on depressed '24e earnings, goes to 11x for '25e
The share is currently trading at 15x '24e EV/EBIT, above its historical average fwd. EV/EBIT of 12x, but we highlight that '24e is likely bottom-of-cycle earnings. For '25e, which we also do not expect to be a year with fully normalised earnings, the multiple drops markedly to 11x.

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