Polygiene: Promising signs for H2 with orders picking up - ABG

Q2 still faced operational headwinds Revisions from lower organic growth assumption Fair value range of SEK 21-34 (22-35) Q2: Sales +1.3% y-o-y, organic growth below expectations

Polygiene reported Q2 sales of SEK 47.5m (+1.3% y-o-y), which was 10% below ABGSCe, as organic growth and the contribution from SteriTouch were below expectations. However, EBIT of SEK 11.5m (10.0m) was 11% above ABGSCe, as a weak SEK meant a greater FX effect than we anticipated. This tailwind looks set to continue in the coming quarters. The lower organic sales growth was mainly related to the Freshness business area, as distributors have lowered inventories because of the ongoing uncertain macro environment, which hurt Polygiene’s recognized sales in the quarter; however, the use of additives in the textile factories increased 11%, meaning that this should be a temporary headwind that will normalise in H2. Furthermore, Polygiene signed promising deals in the quarter: Adidas China and NIO for example. Management also said that current trade shows have been a success, with a lot of interest in particular from the Aviation industry.

We lower ‘23e sales by 3% and EBIT by 3.3% We lower ’23e sales and EBIT by 3% and 3.3%, respectively, after the report. The main reason is the deviation on sales in Q2 and especially the lower organic growth. Q2 EBIT was above expectations, but this was driven by FX. Therefore, we keep our underlying opex more or less intact for ‘23e, resulting in an EBIT margin of 25.2% in ’23e.

No negative effect from the silver debate seen operationally Management assured investors that it has not seen any negative operational effect from the silver chloride debate that it witnessed earlier this year. It said a decision regarding the use of silver chloride is at least four years away, and Polygiene is preparing to replace it if needed through an increased R&D focus. We lower our fair value range slightly to SEK 21-34 (22-35) to reflect our estimate revisions.

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