Polygiene Group: A step in the right direction - ABG
- Freshness rebounds in Q3...
- ...but Product Protection slides further
- Positive wording on '24 outlook
Q3: Net sales -30% y-o-y (Freshness -17%, Protection -43%)
Polygiene reported Q3 net sales of SEK 28.7m (SEK 41m), down 30% y-o-y with a positive FX effect of roughly 5% in the quarter. This was 7% above ABGSCe and a step in the right direction after recent struggles. The Freshness business area in particular saw a sharp rebound, with sales only down 17% y-o-y and up 70% q-o-q. Unfortunately for the group, the other business area of Product Protection saw a further decline in sales, as it was 24% below the reported sales in Q2. Polygiene has decided to again differentiate the brand platforms for Freshness and Product Protection after trying to merge them earlier. This seems like a logical decision, as Product Protection seems to have lost pace after the merge. The company has also decided to scrap its financial targets and will communicate new ones during Q4.
Positive revisions, '24e EBIT up 8%
Management have guided that Q4 orders to date have exceeded expectations and that the outlook for 2024 is positive. We think Q4 will still be below last year in terms of sales, but note that the comparable numbers get much easier in H1'24, at which point the company should deliver solid growth numbers again. We raise our '24e sales and EBIT by 2% and 8%, respectively, on the back of the report. The lower EPS for '23e is again a consequence of goodwill revaluations hitting the P&L and does not affect cash flow.
Fair value range of SEK 4-11
Our fair value range of SEK 4-11 is unchanged and derived from three different DCF scenarios with long-term EBIT margins between 15%-21%. As we expect that '24e will be a year of recovery in terms of profitability, it makes more sense to look at '25e to get a sense of the current valuation. On our revised numbers, the stock is trading at '25e EV/EBIT of 11.1x.
Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/polygiene/Equity-research/2023/11/polygiene-group---a-step-in-the-right-direction/
