SinterCast: Production ramp-up on track - ABG

Continued series production ramp-up ’22e-’24e adj. EBIT up 5-3% on lower opex Fair value SEK 110-200, production targets reiterated Q2 adj. EBIT SEK 10.4m (+38% vs. ABGSCe of SEK 7.5m) SinterCast reported Q2 sales of SEK 27.9m (in line with preliminary sales figure and ABGSCe), and the gross margin amounted to 75% (ABGSCe 75%), helped in part by a high share of licensing fee sales, but also by an FX boost on the topline. The opex base, while up 22% y-o-y, was kept slimmer than we expected, resulting in an adj. EBIT of SEK 10.4m (+38% vs. ABGSCe of SEK 7.5m), for a margin of 37% (ABGSCe 27%). This included an NRI of SEK -4.9m (ABGSCe SEK -4.5m) tied to the termination of a deferred purchase agreement, which the company announced in the Q1 report.

5-3% adj. EBIT upgrade for ’22e-’24e on lowered opex We raise our adj. EBIT estimates by 5-3% for ’22e-’24e (reported EBIT +4-3%). Sales estimates are kept mostly as is, apart from a -1% sales revision for ’22e due to updated FX assumptions. The main driver of the estimate revisions, however, is lowered opex for all forecasted periods.

20x ’22e EV/EBIT (adj.), fair value range maintained The targets of reaching engine equivalent production of 4.0m during ’22 and 5.0m during ’24 were reiterated in the report. As a reminder, management has previously said these targets are not dependent on new system installations and are achievable through like-for-like growth in existing foundries. As such, the fact that ’22 will be a softer year for new installations should not hamper the company’s double-digit earnings growth prospects, at least for the coming years. On our estimates, the share is now trading at 20x ’22e EV/EBIT (adj.), offering 5-8% dividend yields in ’22e-’24e. Finally, with only smaller estimate revisions made, we maintain our fair value range of SEK 110-200 per share.

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