SinterCast: Production ramping up on the ’21 installations - ABG

Q2 report due on Wednesday, 17 August Strong production volumes, sampling cups decline y-o-y Full order books support stable sales if demand declines Pre-released figures show strong production, softer sales
On 12 July, SinterCast pre-released selected H1 figures ahead of the report. Series production volumes came in at 3.6m engine equivalents (ABGSCe 3.5m), up 13% y-o-y, but sales were down 1% y-o-y at SEK 27.9m (-15% vs. ABGSCe 32.7m). This was partly due to a 37% y-o-y decline in sampling cup sales volumes (Q2’21 was a record quarter for sampling cups). Driven by a favourable revenue split and positive FX effects on a strong USD, we estimate a strong gross margin of 75% (70%) and adj. EBIT of SEK 7.5m, for a margin of 27% (26%). This includes a one-off expense tied of the termination of a deferred purchase agreement of a System 4000 (which the company has said will not result in lost sales, as there was no CGI production in this foundry).

Raised FX boosts top-line, but lowered equipment sales For ’22e, we take a more cautious approach to estimated equipment sales, as the pipeline is fairly empty at the moment. We now model SEK 3m for FY’22e. However, we remain confident that the installations completed in ’21 should ramp up according to plan, driving solid series production sales growth. Raised FX assumptions also help the ’22e top-line, but should be mostly offset at the EBIT level by hedges.

Order books should be filled for some time to come There are increasing worries of a looming economic recession. While SinterCast is not immune to economic conditions, we argue that the order backlog in the automotive industry should mean that even if demand and new orders slow down, it will take customers a long time to deliver on the existing order books. Per the latest company communication, however, the bottleneck is still on the supply side, and slowing demand has not been observed so far. Finally, on our estimate changes, we lower our fair value range to SEK 110-200 (130-23 ... Läs mer på ABG Sundal Collier

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