SinterCast: Stable in uncertain times - ABG

Series production keeps going strong

US dollar boosts sales estimates

Equipment pipeline remains empty for now

Pre-released figures in line with our estimates
The figures pre-released by SinterCast in September show series production volumes of 3.6m and 3.7m engine equivalents in July and August, respectively, up 20% and 16% y-o-y. As September is generally one of the strongest months of the year for SinterCast, we expect the company to have reached its goal of 4.0m engine equivalents in September, yielding an average of 3.8m engine equivalents in Q3e. We estimate revenue will come in at SEK 34m, growing 33% y-o-y with double-digit organic growth, but also a highly significant FX effect due to the company’s exposure to the US dollar. We expect Q3e to deliver a continued strong gross margin of 74% (75%), and an adj. EBIT of SEK 10.4m, for a margin of 31% (31%). On the EBIT margin and net earnings level, we do not anticipate margin expansion due to the FX-boosted revenue, as this will likely be offset by losses in hedging derivatives. The strong margin is due to continued low equipment sales.

FX boosts estimates, but equipment pipeline remains empty
For ’22e we leave sales relatively unchanged, while decreasing adj. EBIT by 6%. We increase our sales estimates for ’23e-’24e by 7% and 12%, respectively, mostly as a result of FX effects. After increasing opex on hedging derivatives, this results in adj. EBIT margin estimate changes of 8% and 17%, respectively. Furthermore, we reduce expected equipment sales in ’23e-’24e, back to an average level of 8m, as we take a more careful stance on potential overperformance in this segment, in light of the currently empty pipeline.

Outlook stays strong
The order backlog in the automotive industry remains significant, leading us to believe that SinterCast should be able to continue performing even in the worsening economic climate. We therefore maintain our fair value range of SEK 110-200 per share. On our current estimates, the share is ...
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