SinterCast: Better margins next time - ABG

Sales 31.7m (-2% vs. ABGSCe), EBIT 6.3m (ABGSCe 9.0m)
Unspecified one-offs in quarter, we estimate adj. EBIT of 9-10m
Announces end-of-life of a high-volume programme in H2'24

Q2 results
Sales came in at SEK 31.7m (-2% vs. ABGSCe 32.5m), up 14% y-o-y. EBIT was SEK 6.3m (-30% vs. ABGSCe 9.0m), and included an unspecified NRI expense for the GIFA world foundry trade fair, held every four years, (ABGSCe 0m). This resulted in an EBIT margin of 20% (ABGSCe 28%). Net profit was SEK 6.2m (-37x% vs. ABGSCe 9.8m). The company also incurred some dual expenses connected to the retirement of two employees during the quarter, which will no longer be paid going forward. Adjusting for this and the GIFA expense, we estimate EBIT would have been SEK 9-10m, above our estimate of 9m.

Estimates and outlook
On the Q2 numbers in isolation, EBIT estimates would come down by 6-4% for ’23e-’25e. In the report, the company announced that it expects temporarily lower series production volumes in H2'24, due to one of its high-volume programmes reaching its end-of-life stage in that period. Management now aims to reach 5m in Engine Equivalent production in late 2025, and remains confident in continued growth through 2030, citing a number of promising programmes. Management also reiterates its belief that equipment installations will pick up again in H2'23.

Final thoughts and valuation
On our pre-Q2 estimates, the share is trading at 18-12x ’23e-’25e EV/EBIT, offering a dividend yield of 6-9% for ’23e-’25e.
Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/sintercast/Equity-research/2023/8/sintercast---better-margins-next-time/