OrganoClick: A return to normal - ABG

Q1 report due on Wednesday, 4 May
FW margins should be secure for Q1 and Q2
30 ongoing NWT projects, 10 in production phase

Gross margin should be back on track after difficult H2’21
We expect sales of SEK 34.5m, up 16% y-o-y, and a gross profit of SEK 8.0m, for a margin of 23.2% (22.8%). Following a difficult H2’21, we expect a return to normal gross margins as contracts in Functional Wood (FW) have been renegotiated to now match input cost with sales price. To our understanding, these contracts are typically on a six-month basis, meaning that margins in FW should be secure over the segment’s “peak season” in Q2 as well. However, the continuing increase in wood prices may have an impact on B2C demand (~20% of FW sales is B2C), but we argue B2B demand will be more inelastic, since they have longer lead times and are already committed to construction projects during Q2-Q3. In Green Coatings & Maintenance, we expect solid organic growth in Q1 (15%), driven by OrganoTex sales, and in Nonwoven & Technical Textiles (NWT) we should see continued sequential ramp-up in the existing Duni contract (we expect SEK 2.0m sales, 0.8m in Q4’21), which is expected to reach SEK 30m in annual sales run-rate by Q3’22.

’22e sales estimate down 5%, ’23e-’24e unchanged
During the quarter, OrganoClick signed a new NWT contract with Ahlstrom-Munksjö. This is an exciting partner, especially considering that discussions are ongoing to implement biobased binders in more of their non-woven production, but the contract itself was more back-end loaded towards ’23e and beyond than we had expected, whereas volumes in ’22e should be relatively small. As such, we lower our ’22e sales estimate by 5%, but leave ’23e-’24e unchanged.

Valuation and NWT pipeline update
The share has come down 34% YTD and is currently trading at 14-9x ’23e-’24e EV/EBITDA. As of 6 April (in the ’21 annual report) the company says it currently has 30 ongoing projects in NWT, of which 10 are in production phase. Several of these, ...
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