Polygiene: External factors continue to be problematic - ABG

Q1 performance OK given the circumstances
Resetting growth expectations
Comforting words on use of silver

Q1: Sales +8% y-o-y, adj. EBIT of SEK 9.1m (12.9m)
Polygiene continues to be affected by macro-economic factors that stem from the war in Ukraine and Covid-lockdowns in Asia. The latter seems to be having the most negative impact as supply chains are constrained, which affects Polygiene’s customers ability to produce its products on time. The shortage of Polymers that affected Q4 sales is in a better state now, and the company has enough inventory to produce for the coming six months. Polygiene also kept the gross margin flat q-o-q, which suggests that it has been able to increase prices to customers, to meet the higher input costs. Q1 net sales were SEK 45m (+8% y-o-y), organic growth was probably flat to slightly negative given the strong USD vs. SEK. EBIT was SEK 3.8m (10.3m), but adjusted for M&A costs and FX charges for intercompany loans, adj. EBIT was SEK 9.1m (11.1m). Sales and adj. EBIT were 11% and 18% below ABGSCe, however we think it was comforting to see gross margins flat q-o-q as it was a worry going into the report.

Long-term sales estimates down 6%, EBIT down 10%
Given the short-term issues that the company faces and with the Q1 performance in mind, we lower our growth assumptions in the forecast period. We lower our ‘22e-‘23e sales by 7-6%, mainly from lower organic growth. EBIT for the same period is lowered by 23-14%, however the ‘22e EBIT revision is affected by the non-cash FX adjustment for intercompany loans.

New fair value range of SEK 22-35 (26-40)
We revise our fair value range to SEK 22-35 (26-40), mainly from slightly lower organic growth and margin assumptions in our different scenarios. Regarding the silver debate, we think the company offered some comfort during the conference call where it suggested it could replace silver if needed. Moreover, sales from Europe were up 15% y-o-y, suggesting that the European market is by no means dead as ...
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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/polygiene/Equity-research/2022/4/polygiene---external-factors-continue-to-be-problematic/