SinterCast: Series production starts off strong in ’22 - ABG

Q1 report due on Wednesday 27 April
Strong series production, softer equipment sales
21x ’22e EV/EBIT, 5-8% ’22e-’24e dividend yield

Q1 expectations
We expect Q1 sales of SEK 30.2m, up 24% y-o-y (+13% organic and +11% from FX on a stronger USD). According to a company press release, Q1 series production volumes remain stable at 3.2m annualised engine equivalents (ABGSCe was 3.3m), with March peaking at an impressive 3.6m. For sampling cup volumes, we expect a slight sequential decline to account for customer de-stocking effects, following Q4’21 where sampling cup volumes were high. Although 2022 looks to be a strong year for series production, we believe equipment sales will be somewhat softer. SinterCast delivered on much of its pipeline of new installations during H2’21, and due to new pandemic restrictions at the start of ’22 that pipeline has been difficult to replace. We expect EBIT of SEK 8.6m, for a margin of 29% (35%) on a growing opex base, which is being put in place to further scale operations.

Minor EBIT estimate changes, sales up on FX effects
Following a hike in the USD/SEK rate and SinterCast’s higher USD/SEK sensitivity as per the 2021 annual report, we raise ’22e sales by 2%. This also includes some negative estimate revisions in ’22e equipment sales, due to the currently smaller pipeline of new installations. The net effect of the aforementioned revisions is that our ’22e EBIT estimate is up by 1%. For ’23e-’24e, we make no estimate revisions

Trading at 21x ’22e EV/EBIT, reiterate fair value SEK 130-230
On our current estimates, the share is trading at 21x ’22e EV/EBIT, offering a 5-8% dividend yield for ’22e-’24e. We keep our fair value range of SEK 130-230 per share, which we derive by discounting future dividends at 8-12% cost of equity, since SinterCast pays out ~100% of EPS as dividends.
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