OrganoClick: All eyes on NWT ramp-up in H2 - ABG

Q2 report due on Wednesday, 17 August Fewer newbuilds could be a headwind for FW in ’23e NWT ramp-up in H2 crucial for confidence Softer Q2 for weather-dependent Organowood and Biokleen
We expect Q2 sales of SEK 45m, up 13% y-o-y, and gross profit of SEK 12.4m, for a margin of 27.6% (20.9%). The strong growth trend in Organotex should continue, but we expect a somewhat softer quarter for the more weather-dependent products, namely Organowood and Biokleen (see page 3 for Q2 weather), which should affect Functional Wood (FW) and Green Coatings & Maintenance (GCM). In Non-woven & Technical Textiles (NWT), we expect continued sequential ramp-up, but H2 should see this growth accelerate, mainly due to the Duni contract reaching full volume but also some ramp-up in the Ahlstrom-Munksjö deal. We expect EBIT of SEK -2.2m (-4.1m). Moreover, the abnormally high inventory in Q1’22 should start to decrease from Q2 onwards as legacy Organowood is phased out in favour of the new Silicium HT (should be fully phased out by Sept. ’22, according to the company).

Sales lowered by 4% for ’22e-’24e, driven mostly by FW We lower ’22e-’24e sales by 4%, driven mostly by changes to FW sales estimates, where we see not only softer activity in Q2 in B2C sales, but also fewer newbuild starts, which we believe could affect ’23e-’24e B2B sales. However, we note that despite FW being the largest segment today, we expect most earnings growth to come from high-margin product sales in NWT and GCM.

Accelerated NWT ramp-up in H2 is crucial Since the Duni contract was announced in Feb ‘21, the ramp-up in sales has taken longer than expected, which has weighed on the share. While the longer lead times are somewhat understandable given the Duni deal was OrganoClick’s first contract for non-woven binders, we argue that during H2’22 the company needs to start delivering significant volumes to restore investor confidence. In addition, the wait for new contracts continues, as OrganoClick has stated it has sever ... Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/organoclick/Equity-research/2022/7/organoclick---all-eyes-on-nwt-ramp-up-in-h2/