Studsvik: Solid top-line but lower profitability in Q2 - ABG

Q2 sales growth of 1% y-o-y EBIT down 8-6% for ’22e-‘24e Business with Russia on pause for now Q2: Sales of SEK 203m (201m), EBIT of SEK 8.3m (17.3m)

Studsvik reported Q2 sales of SEK 203m (+1% y-o-y), which was 4% above ABGSCe as the Decommissioning business showed a smaller decline y-o-y than we anticipated. The other three segments showed healthy sales growth compared to a year ago. EBIT was SEK 8.3m (SEK 17.3m), corresponding to an EBIT margin of 4.1% (8.6%). This was below our forecast of SEK 12.9m with an anticipated margin of 6.6%. Despite the lower EBIT for the group, we found it positive that the Decommissioning business returned to black numbers after two loss-making quarters. However, the other three segments were below our expectations. Waste Management had an unfavorable sales mix with mostly advisory sales that affected profitability negatively. The Fuel and Material Technology (F&MT) business had to pause orders from Russia and prioritise other orders that probably caused a slight effect on the EBIT margin for the segment. Also, Scandpower had limited sales of licenses, which is a high margin business, which caused lower profitability in that segment.

Estimate revisions mainly due to lower expected profitability We only make slight adjustments to our sales estimates on the back of the report but lower our expected EBIT margins. We assume lower margins in three out of four business areas, while the Decommissioning business is raised and slightly offsets the other revisions. In total, this results in a negative EBIT revision of 8-6% for ‘22e-‘24e. We still expect Studsvik to reach ~10% EBIT margin for the group in ‘24e, compared to its financial target of an EBIT margin of 12%.

‘23e P/E of 12x, EV/EBIT of 9.6x and a 4.2% dividend yield Studsvik does have business relationship with Russian companies, mainly in the F&MT business area where it tests materials and provides medical isotopes to other customers, which have originated from Russian nuclear reactors. ... Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/studsvik/Equity-research/2022/7/studsvik---solid-top-line-but-lower-profitability-in-q2/