Nilörngruppen - Continuing to surprise on the upside

Strong Q4 report, aided by non-recurring effects Demand is returning faster than anticipated Share is trading at ’21e-’23e EV/EBIT 12x-9x Q4 details Sales came in 12. 5% above our expectations, an increase of 1% (+13% organic, -12% FX). This was significantly better than our expectations, primarily explained by increased demand from customers within e-commerce in general and sports in particular, both of which are customer groups that have benefitted from COVID-19 in terms of demand. In total, it seems as though demand is recovering significantly faster than we had anticipated.

Gross profit came in 8% better, while gross margins were c. 2pp lower than expected. The high gross profit was primarily driven by stronger sales, while the lower margin to our understanding is explained by a return to a larger share of outsourced production as demand has normalised.

We anticipated this effect to come in early 2021, meaning it does not move estimates materially, looking forward. Strong profitability aided by one-time effects EBIT came in 37% above our estimates. The significant beat is explained by 1) higher volumes than expected, 2) retroactive government supports, primarily explained by furloughs made in Q3, and 3) a cancelled industry fair.

In 2019, the company took part in an industry fair, which was cancelled in 2020 due to COVID-19. However, looking into 2021, we expect this fair to be held again, meaning that this can be seen as a one-time effect. Estimates up low-single digits On the back of the beat, and the faster than expected recovery, we raise our sales estimates by 1% ’21-22’e.

This triggers estimate revisions on EBIT of 3%-1% ‘21e-‘22e on the back of the scale. We continue to be cautious on margins going into 2021 as favourable gross margin conditions combined with government support had a significant effect in 2020. On our updated estimates, the Nilörngruppen share is trading at a 2021-2023e EV/EBIT of 11.

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