OrganoClick: Gross margin is back on track - ABG

Gross profit SEK 8.2m (+3% vs. ABGSCe 8.0m)
Expects double-digit growth and increasing gross margin
15-10x ’23e-’24e EV/EBITDA on pre-Q1 numbers

Q1 outcome
Sales were SEK 32.6m (-5% vs. ABGSCe 34.5m), up 10% y-o-y. The gross profit was SEK 8.2m (+3% vs. ABGSCe 8.0m), for a margin of 25.2% (ABGSCe 23.2%), and EBIT was -4.2m (ABGSCe -5.1m). As we had estimated, gross margins are now back on track, following a difficult H2’21, as cost increases in Functional Wood have been moved on to customers. However, in Non-woven and Technical Textiles (NWT), there was a planned March delivery that was deferred (and has now been delivered in April), meaning that NWT sales in Q1 amounted to a disappointing SEK 0.2m (ABGSCe 2.0m). According to management, NWT would have seen q-o-q growth in Q1 (from SEK 0.8m in Q4’21) if this delivery was completed in March.

Estimate changes and outlook
We do not expect any significant revisions on the Q1 numbers. The soft NWT sales, as mentioned, are not lost sales, and for the other segments there were no major surprises. In terms of outlook, the company states that it expects double-digit growth and increasing margins for the year.

Final thoughts and valuation
On our pre-Q1 estimates, the share now trades at 15-10x ’23e-’24e EV/EBTIDA, having come down 29% YTD. As has been the case for the past few quarters, the focus will be largely on new NWT contracts being signed and ramp-up in existing contrats.
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