Svedbergs: Showing continued strength in projects - ABG

Q2 beat on sales, below on EBITA We expect the project market to slow, starting in H1’23 We lower ’23e-’24e EBITA by 2% Coming in strong on top-line growth

Svedbergs reported a strong Q2’22 sales performance, 6% above ABGSCe with a gross margin of 41.2% (+0.7pp. vs. ABGSCe). The three brands Svedbergs, Macro Design and Roper Rhodes all displayed continued top-line momentum, with Roper Rhodes reporting 14% y-o-y sales growth. Q2 EBITA was 2% below our estimates due to a lag effect in price adjustments. Management states that it should be able to continue to deliver products despite problems associated with sourcing and freights. On the negative side, the Danish brand Cassoe had negative growth of 3% y-o-y. According to management this was the result of Danish consumers reacting more drastically to rate hikes and inflation than in the Group’s other regions. Nevertheless, management believes it has been able to offset the negative response better than competitors.

Expect a slowdown in projects to become visible in H1’23 Entering H2’22 we believe there is cause for optimism regarding continuous organic growth. The Swedish building start index is higher on a trailing twelve-month basis than the preceding period. Due to this, and considering the strong Q2, we raise ’22e sales by 3%, but leave our ’23e-’24e sales basically unchanged due to a market slowdown already being factored in to our estimates. Looking at the margins, surging raw material prices and increased freight costs remain uncertain factors. Although we expect Svedbergs to be able to offset a majority of this with price hikes, we lower ’23-’24e EBITA by 2%.

Share is trading at 8x-7x EV/EBITA in ’22e-’23e The Svedbergs share is down 56% YTD, currently trading at 8x-7x EV/EBITA in ’22e-’23e. On the back of our small estimate changes, we lower our fair value range by SEK 1 to SEK 49-64 (50-65) per share. Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/svedbergs/Equity-research/2022/7/svedbergs---showing-continued-strength-in-projects/