OrganoClick: B2C products struggle, better for B2B - ABG

Decent NWT ramp-up in Q2, will accelerate in H2 Continued NWC build-up could cause some fears 13-8x ’23e-’24e EV/EBITDA on pre-Q2 numbers

Q2 outcome
Sales were SEK 38.5m (-14% vs. ABGSCe 45.0m), gross profit was 6.8m (-45% vs. ABGSCe 12.4m), for a gross margin of 17.6% (ABGSCe 27.6%), and EBIT was -6.7m (ABGSCe -2.2m). The mostly B2B driven Functional Wood segment saw decent sales (-3% vs. ABGSCe), while the more B2C driven Green Coatings & Maintenance underperformed (sales -33% vs. ABGSCe). In Non-woven & Technical Textiles (NWT), deliveries to Duni are starting to ramp up (sales SEK 1.6m, ABGSCe 2.0m) but most of the ramp up will come in H2. The working capital build-up continued in Q2, and although the company says this will reverse in Q3 it might cause some balance sheet fears.

Estimate changes and outlook The isolated Q2 numbers would imply 5-2% negative sales estimate revisions of for ’22e-’24e. Regarding new NWT contracts, the company says a major industrial customer is preparing to launch its first product using OrganoClick’s binders.

Final thoughts and valuation The company reiterated that H2’22 will be when the NWT sales ramp-up accelerates, which we argue is what most focus will be on (along with the company’s ability to free up capital tied in inventory). In Q3, OrganoClick expects to be close to the annual run-rate of SEK 30m sales from the Duni contract, and by Q4 deliveries will be at full volumes. Finally, on our pre-Q2 estimates, the share is trading at 13-8x ’23e-’24e EV/EBITDA.

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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/organoclick/Equity-research/2022/8/organoclick---b2c-products-struggle-better-for-b2b/