Studsvik: A decent Q1 but Russia worries remain - ABG

Q1 sales growth of 15% y-o-y, albeit lower EBIT
Range of estimate adjustments, long-term EBIT -1%
Working capital build-up to ease throughout 2022

Decommissioning is still trying to find its balance
Studsvik reported Q1 sales of SEK 188m (+15% y-o-y) with an adj. EBIT of SEK 7m (8m). The F&MT business area impressed, with an adj. EBIT margin of 17.2% (4.7%) whereas struggles continued in the Decommissioning business area, with a second consecutive quarterly loss following last year’s high demand in Germany. In the conference call, management said that it thinks utilization rates will improve for Decommissioning in the coming quarters and that it was hurt by higher sick leave and COVID-19 restrictions in Q1. Scandpower took some growth initiatives in the quarter, resulting in improved sales growth but a lower adj. EBIT margin y-o-y. We think this is the right way to go and hopefully Studsvik can implement a SaaS business model instead of having large license sales in individual quarters. We also saw a working capital build-up in Q1 of SEK 28m, and management expects some of that to be released throughout the year.

Lower margin assumptions for Decom. offset by F&MT
We lower our margin assumptions for the Decommissioning business area after the report. Long-term this is almost offset by higher assumed profitability in F&MT, but ‘22e adj. EBIT is down 11%. We also more clarification of the Russia exposure in the conference call; deliveries to Russian customer TVEL are on hold but it is not part of current sanctions. Studsvik thinks it can offset some of this loss of sales by prioritizing other orders. We lowered ‘22e sales prior to the report based on the Russian exposure and we now delay sales from ’23e-‘24e, resulting in ~2% lower sales for the period.

’22e-‘23e EV/EBIT of 11.2x-8.4x
The stock is currently trading at a P/E of 15.3x and an EV/EBIT of 11.2x for ‘22e with an expected dividend yield of 3.2%.
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