Prevas - A solid report to end the year - ABG

Q4: Sales +6% and EBITA +17% vs ABGSCe
Prevas reported another solid report for Q4, with sales up 22% y-o-y, of which roughly half was organic. We calculate that organic growth was evenly split between price increases and volume growth, but we do not know the exact utilisation rate. The EBITA margin was flat y-o-y, but we deem 13.4% to be solid, especially as Prevas acquired some companies in 2022 with lower profitability. The EPS was down y-o-y, but it was mainly driven by one-time effects, such as a revaluation of stock options and a normalised tax rate. The board proposed a dividend of SEK 4.50 (3.50), and we saw some build-up of working capital at the end of the year, which the company expects will normalise in the coming quarters.

Demand is still improving from many sectors
We have been rather cautious in our '23 outlook previously, as we thought the deteriorating PMIs would have a negative effect on Prevas' demand this year. However, the company seems to be entering 2023 with full pace and no signs of weaker demand. It mentioned that some small segments related to consumer products have seen a decline, but this has been more than offset by increasing demand from the defence, energy, engineering and automotive industries. This information leads us to evaluate our stance, and we increase '23e sales by 3% and EBITA by 18%.

On a journey to become a "quality" company
Prevas wants to be seen as a quality company and after a successful turnaround and two years of delivering in line or better than industry peers, we think it has some merit to the claim now. The relative valuation towards key peers is still intact and Prevas is around 35% below on '23e EV/EBIT. We increase our fair value range to SEK 115-166 to reflect our estimate revisions and the higher multiples in the sector of late.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/prevas/Equity-research/2023/2/prevas---a-solid-report-to-end-the-year/